Are You Responsible for Your Parents’ Debts? You Might Be Unpleasantly Surprised.

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April 24, 2014 by Lisa Brammer

Type this question into a Google search and you’ll find a plethora of articles explaining that if your parents rack up some credit card debt, medical bills, or leave an unpaid loan when they pass on, the bills will be paid by their estate. If there isn’t enough money in the estate to cover all of their debts (there goes your inheritance) then those bills go unpaid—you are not responsible (even if someone tries to convince you otherwise). However, there are always exceptions like if you co-signed a loan, are a joint account holder on a credit card or bank account, or if you held power of attorney over your parents’ holdings and spent their money as your own. Now we are talking about something totally different, you would be on the hook to pay those debts.

According to the website for the Federal Trade Commission (FTC), the nation’s consumer protection agency, family members typically are not obligated to pay the debts of a deceased relative from their own assets. http://www.consumer.ftc.gov/articles/0081-debts-and-deceased-relatives

I guess the operative word here is typically because an article published in the Washington Post reported that about a month ago, without notice, the U.S. government intercepted the federal and state tax refund for Maryland resident Mary Grice. She found out that her tax refunds had been intercepted when she received a letter saying her refund had gone to satisfy an old thirty-seven (yes, 37) year old debt.

Grice’s father passed away back in 1960 when she was four years old leaving Mary, her mother, and her four other siblings on their own. Not long after, Sadie Grice, Mary’s mother, received survivor benefits from Social Security to help with expenses until the children turned 18.

Now, four years after Sadie Grice’s death Social Security claims it overpaid someone in the Grice family in 1977 and after over three decades the government decided to take Mary Grice’s refund to pay the debt.

Grice found a lawyer, Robert Vogel, who was willing to take her case free-of-charge. He filed suit in federal court in Greenbelt, Maryland alleging the government denied his client due process by failing to give her notice of the debt and by taking her money even though she was not receiving benefits at the time the debt occurred (She would have been twenty-one in 1977 and no longer a recipient of survivor benefits).

Social Security officials informed Grice they had sent her notice to the post office box in Roxboro, N.C. (the one she rented for two years from 1977 to 1979) even though they send annual statements regarding her own Social Security account to her current address.

According to the article in the Post, officials from Social Security also told Grice six people (the five Grice children and her father’s first wife) all received benefits from her father’s account. The government doesn’t research who exactly got the overpayment. If children indirectly received assitance from public dollars paid to a parent, the children’s money can be taken. Its policy is to start with the oldest child and work down from there until the debt is paid (Mary has both older and younger siblings).

Grice is not alone—this is not an isolated event. The Washington Post reported the government was intercepting state and federal tax refunds for about 400,000 Americans who had relatives who owed money to the Social Security agency. Some of the debts, like in Mary’s case, come as a complete surprise to those held responsible and go as far back as the mid-twentieth century.

After the Post’s article came out earlier this month, hundreds and hundreds of unhappy taxpayers whose refunds had been seized complained to Congress that they had not been given notice of the debt nor an explanation as to why they were being held responsible for their deceased parents’ debts.

Ten days ago, on April 14th, the Social Security agency announced it would suspend their efforts to collect debts owed to the government that were more than ten years old.

According to Grice’s lawyer, Robert Vogel, discontinuing these collection efforts “is the right thing to do. It’s the first step. The next thing they have to do is stop collecting debts from children under any circumstances.”

Next week we will look at part II in this two part series on adult children’s responsibility in paying their parents’ debt. I’ll leave you with three words—Filial Responsibility Laws.

Founded in 1950, United Credit Service, Inc. is a full service revenue cycle management and debt collection agency in Wisconsin providing highly effective, customized one on one management and recovery solutions for our business partners. We offer pre-service collection solutions as well as traditional back-end collections. Visit our website at http://www.unitedcreditservice.com or call 877-723-2902.