Feb 25, 2025
Losing a parent is devastating, and taking on the tasks that follow can be overwhelming. This includes dealing with any inheritances. If your last surviving parent left behind a house with no mortgage, for example, your financial situation is one of those things that has changed.
But what if they also had some debts, such as a home equity line of credit (HELOC) and credit card debt, and no life insurance to help cover any of it? Those debts are likely going to have to be paid.
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The question then becomes, how should you deal with the inherited debt and should you keep the home?
What happens to inherited debt?
As a general rule, if you inherit debt, you are not responsible for paying it out of your own pocket. The creditors can come after the estate, though, and can try to collect the debt from the assets the deceased left behind. This is especially true when it comes to the HELOC because that is a secured loan with the house acting as collateral.
Since there was no life insurance or savings, the home may be the only item of value in the estate. In this case, when creditors make claims against the estate, they will likely have to be satisfied using equity from the home.
You could access this equity by selling the home, using some of the proceeds to pay back the debt and then collect the rest since the property was left to you. Alternatively, if you want to keep the home, you could get a mortgage for the amount owed, use the proceeds of the loan to pay back the outstanding debt and then pay off the mortgage over time.
The good news is that your mom's estate likely will not owe estate taxes, as there's a $13.99 million estate and gift tax exemption — so at least the estate won't be reduced by having to give the IRS a cut.
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Should you keep the home?
Deciding whether to keep the home or not is going to be a personal choice and you need to consider both the financial and emotional implications.
First and foremost, think about whether you can afford the home. You'll have to pay the mortgage you took out to cover debts. You'll also have to pay for property taxes, insurance and upkeep. You'll want to be 100% sure that all of these costs are affordable to you so you don't risk keeping the house and getting foreclosed on.
You also have to think about whether you want the emotional burden of owning the home. If you spent a lot of time there, maybe even grew up there, it will contain a lot of memories. This can be a positive or negative aspect, and it's unique to each person.
While only you can decide on the emotional ramifications of keeping the home, when it comes to the financial issues, be sure to run the numbers carefully. If you already have a home or if you had planned to rent instead of buying, then you may decide that keeping the house isn't right for you.
Whatever you decide, the choice is yours since you're now responsible for the house. Creditors will want to get paid either way, so the choice of what to do should be yours alone.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
