This is a great question. The time to ask it is before someone becomes a co-borrower with a child, not after the parent dies. The answer must be provided by someone that knows the total scenario and is competent to answer these types of questions. With the limited information you can provide here it is not possible to give a specific answer to your question.

Some things to think about:

In almost all instances the lender requires the co-borrower to take title to the property. Therefore the parent co-borrower along with the child co-borrower is an owner of the property. Who inherits an owner's interest in a property if they die? That depends on how title was taken by the owners, whether the decedent had a will, and if they did not, the intestate laws of the state where their estate is settled. It is possible that a parent could die and the child that has an ownership interest in the property with them doesn't inherit any of the parent's interest in the home. In a case such as this they could end up owning the home with whomever did inherit the parent's interest. I hope they get along with their new co-owners!

Another thing to keep in mind. The estate tax only affects the wealthiest 2% of all Americans. So unless the parent is very wealthy it is unlikely that the estate tax will apply to their estate. Additionally keep in mind that the estate tax is calculated on the "taxable value" of the estate which is the gross estate less the deductions and credits. It is not computed on individual heirs based the individual things they inherit. It is calculated on the entire estate.

Here are some answers to FAQs from the IRS on estate tax. Note where it says, "The laws on Estate and Gift Taxes are considered to be some of the most complicated in the Internal Revenue Code." Now that's saying something's complicated!

http://www.irs.gov/businesses/small/article/0,,id=108143,00.html