What Liability Adult Children Can Have For Their Parent’s Debt

What Filial Responsibility Do Children in Georgia Have for their Parents’ Debts?

As more aging parents experience cognitive decline, adult children often step in to help. In some cases, they sign nursing home or retirement community contracts in their own names. This can create serious financial risk.

When a parent no longer has capacity to make decisions, legal responsibility can shift. This is sometimes called filial responsibility. By signing contracts personally, adult children may become responsible for their parent’s expenses without realizing it.

Many adult children do not fully understand their parents’ financial situation. That lack of information can make decisions even harder. I encourage families to have open conversations early. Parents should share key financial details before cognitive decline begins. Adult children should also ask questions and stay informed.

The Trouble With Unknowingly Becoming A Guarantor

When you sign a contract for a parent, you must be careful how you sign. This applies to care facility agreements and even simple contracts like a cellphone plan.

If you sign your own name without clarification, you may accept personal responsibility for payments. This can happen even if you intend to sign on your parent’s behalf.

Many people misunderstand what it means to sign for a cognitively impaired loved one. Without proper wording, you could become legally responsible for the obligation.

How To Avoid Becoming Your Parents’ Guarantor

One way around this kind of trouble is for the parent to have an estate plan that includes a Financial Power of Attorney. Once appointed as the Financial Power of Attorney, the child will sign all subsequent legal documents on their parent’s behalf as their parent’s agent, which does not create individual liability for the contract they sign in their fiduciary capacity.

If you’re named the agent for your parents on a financial power of attorney document, you will have access to your parents’ bank and brokerage accounts to pay the retirement or nursing home on their behalf. Another way to separate your responsibility as power of attorney from any personal financial obligation is to sign your parent’s name as the responsible party on the contract, and after that write, “by [your name] as power of attorney,” followed by the date.

More importantly, don’t ever sign anything you do not fully understand, particularly something suggestive of a personal guarantee. And, even more importantly than that, encourage your parents to create an estate plan while they are fully mentally competent. While you’re at it, create one for yourself too! Give our office a call at 404-370-0696 to discuss your situation in greater detail before you take any financial action on your parents’ behalf.

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!