I’m the sole heir to a broke aunt — does this mean I’ll inherit her debts and ruin my own finances?

Let’s take the case of Todd, who is in his 30s and whose aunt, in her 70s, is dying of cancer. Todd was close to his aunt, and she’s already told him he will be her only heir, as well as the executor of her estate. Unfortunately, her estate consists of a run-down house with a mortgage and tens of thousands of dollars in credit card debt.

Todd’s aunt is trying to add his name to the deed of the home, and she’s drawn up estate planning documents already. But Todd is worried he could be on the hook for her debt, and is concerned about what to do with the house, which is in poor shape.

Will Todd’s finances be at risk from his inheritance?

Can you inherit debt from a broke relative?

The good news for Todd is that, in most situations, you can’t inherit debt from a broke relative.

“You don’t inherit someone’s debts,” Barry E. Janay, Esq, principal and founder at the law office of Barry E. Janay, told MoneyWise. “Debts belong to the estate, not to you. The executor’s job is to collect whatever assets exist, pay valid creditor claims in the order the law requires and distribute whatever is left over. If nothing is left, the creditors go unpaid and the heirs receive nothing, but you don’t reach into your own pocket to cover the shortfall.”

However, Janay warned that if you cosigned or guaranteed the debt, or if it was a joint account held with the deceased person, you are legally obligated to repay the balance. He also cautioned that if you take money from the estate before creditors are paid, you may have to pay it back.

“The biggest and, from my experience, most common situation is when an executor who distributed money to heirs or themself has done so before satisfying creditors in the proper legal priority,” Janay said. “This happens quite frequently and often leads to personal liability in the form of a claw-back liability for that misstep.”

Todd also must make sure he doesn’t voluntarily assume responsibility for what his aunt owes.

“The only way for an executor or an heir to become personally liable for debts of the estate would be for them to expressly agree to do so,” James Dodge, a professor at Purdue Global Law School, told MoneyWise.

As long as Todd avoids taking money from the estate, doesn’t cosign any debt or have delinquent joint accounts with his aunt, and doesn’t sign an agreement with creditors to pay, his inheritance at least shouldn’t cost him. He just needs to know his rights and take his time.

“If the estate is insolvent, the worst thing you can do is rush,” Janay said. “Don’t pay debts out of your own funds, don’t distribute anything early and don’t let a debt collector convince you that family is obligated to pay.”

Should his aunt put his name on the house?

The next big question is whether Todd’s aunt should add his name to the house. While this may seem like a nice gesture or a good idea to transfer it outside probate, Janay said absolutely not. “Adding a loved one, such as a child [not your spouse] to a deed creates a host of problems,” he said.

These issues include tax consequences such as losing the step-up in basis that resets the value of the house to the date of the aunt’s death for capital gains tax purposes, as well as potentially triggering the need to file a gift tax return and creating potential issues with the mortgage and with Medicaid.

“On a barely-above-water house, you may be inheriting a liability, not a gift, and the lender’s ‘due-on-sale’ clause can theoretically be triggered by a lifetime transfer,” Janay said. “This is avoided if you inherit the property because federal protections cover transfers at death and into a living trust, but a lifetime add of a non-spouse co-owner is much shakier ground.”