Allworth Advice | Am I responsible for my late father’s debt?

Every week, Allworth Financial’s Amy Wagner and Steve Hruby, CFP, answer your questions. If you, a friend, or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.

J.W. in Fort Mitchell: Please help. My father recently passed away with $50,000 in debt. Am I now responsible to pay all this off? (My mother already passed a few years ago.)

Answer: We know how stressful and emotional things must be for you right now, especially with the thought of having to pay back so much money looming over you. So, while we are not lawyers, we can provide general guidance. And we have good news – children are typically not responsible for their parents’ debts.

However, any outstanding debts will pass on to his estate. This means that the executor (who is perhaps you) will need to pay all debts and liabilities using any assets he left behind – such as a car, home, investment accounts, etc. If there are any inheritances to be distributed to beneficiaries, the debts and liabilities must be paid off before this happens. And if the estate runs out of money before paying off all debts and liabilities, the remaining debts are essentially left unpaid.

We should mention one big caveat: If you shared any debt with your father, such as a joint credit card or if you co-signed a loan for him, you would be on the hook if the estate cannot pay (or isn’t permitted to pay).

Here’s the Allworth Advice: If your father’s debt was his own, you, as the son, will not inherit that debt. But make sure you speak with a lawyer who specializes in debt collection law. He or she will be able to provide you (and the executor, if not you) more detailed guidance. And if debt collectors start harassing you to pay your father’s debt, submit a complaint to the Consumer Financial Protection Bureau.

Andrew in Finneytown: You’ve mentioned you don’t recommend closing credit cards. But I’ve had one for just a few years that has an annual fee and it just went up (again). I don’t really use it, and the fee seems really high, so what should I do?

Answer: You’re right. Typically, we don’t recommend closing credit cards because this can negatively impact your credit score in two different ways: The average length of your credit history will shrink (especially if the card has been open for a long time), and your credit utilization ratio will increase (since you have less available credit). Combined, these two components constitute 45 percent of a FICO score, the most commonly used type of credit score.

However, your case may be one of the few exceptions to our advice. Since it sounds like the annual fee is not worth the cost and the card has only been open for a short time, closing the card could make sense – and your credit score might not take too much of a hit. But consider this alternative as well: Call the card issuer and see if you can downgrade to a non-fee card. This should allow you to keep the credit history associated with the card but avoid having to pay the annual fee.

The Allworth Advice is that, in general, we advise against closing credit cards. But there are certain times when it’s financially prudent to do so. If you do decide to cancel, here’s a tip: Check with the card issuer about your annual fee – policies vary by lender, but many will offer a refund.

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Retirement planning services offered through Allworth Financial a SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call (513) 469-7500.

This article originally appeared on Cincinnati Enquirer: Allworth Advice | Am I responsible for my late father’s debt?