Can you inherit debt?

Georgia lawyers have always been able to confidently tell their clients that children do not “inherit” the debts owed by parents. As shown by a recent case in Gwinnett County, however, a child may be liable for certain debts accruing with respect to his parent’s property following his parent’s death.

In that Gwinnett County case, a condominium owner (we’ll call her “Smith”) died without a will leaving several adult children. As a condo owner, during her life Smith was responsible for paying certain condo fees and assessments from time to time.

Upon Smith’s death her children apparently did not wish to use or benefit from the condo.  It is not clear from the facts of the case whether Smith’s children even knew she had died, where she lived, or that she owned the condo. In fact, since no mortgage payments were made after Smith’s death, Smith’s lender foreclosed on the condo unit and sold it to a new owner.

Nevertheless, the condo association sued Smith’s children for the condo assessments and fees accruing from the date of Smith’s death until the date the condo was acquired at foreclosure by the new owner.

Smith’s children argued that they never agreed to pay the condo assessments and fees, and never received any benefit from the condo – and therefore had no responsibility to pay those assessments and fees.

But the Gwinnett County court ruled in favor of the condo association, and the Georgia Court of Appeals upheld that decision about five months ago. Here’s why. Georgia condominium law provides that the “owner” of a condo is responsible for paying the assessments and fees. And Georgia probate law provides that when a person dies without a will her real estate passes to her heirs immediately upon death.

So Smith’s children became the owner of her condo, and therefore responsible for condo assessments and fees, immediately upon her death (even if they didn’t know she had died!) and remained responsible until the condo was transferred to a new owner.

The children should have gone through the probate process. Had they done so, an administrator would have been appointed for the estate. The administrator could have claimed the condo as being needed for the use of paying administration expenses – the condo fees and association dues. The condo could have been sold and those fees and dues paid. Thus the children would not have had to pay them out of pocket. Unfortunately, they did not go through the probate process and had to pay themselves.

The best way not to pass on debt to your children is to be prepared. Have a will and talk to the children about taking the will to probate court put it through the simple probate process at death. In this case if the mother had done this, the children would not have been in that position.

A more common occurrence is debt or liabilities incurred after the parent passes with respect to real estate or property owned by the parent at the time of death. For example, your parent dies without a will. He owned a piece of land with a pond that is a popular fishing spot for the neighborhood. A neighborhood boy goes on the property to fish, falls in a hole and breaks his leg. He could sue the children because they automatically became the owner of the property when the parent died without a will.

It is important to have a will and probate it at the time of death.

Bucky Highsmith is an estate attorney and partner with Stewart, Melvin & Frost, a North Georgia law firm based in Gainesville, Ga.