How Debt Affects Survivors After a Loved One Dies

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Roses on a casket at a funeral
Kzenon /

My husband had been dead less than a week when the first collections call came.

We didn’t have any credit cards or loans, but there were a few lingering medical bills we hadn’t paid — largely because we were busy with more important matters.

When the caller asked for my husband and I explained he was dead, I got the courtesy condolences, followed by the question of whether I was his wife. It was time to pay up, I was nicely told. When I told them I needed to pay for the funeral first, they said goodbye, only to call back a few days later and a few days after that.

It’s not uncommon for creditors to nudge grieving relatives into paying their deceased loved one’s bills.

In case you find yourself in a similar situation, here is what you should know. Keep in mind that laws vary by state, so this article should not be considered specific advice for your situation.

For advice pertaining to your specific situation, seek out the help of a competent financial professional or estate attorney.

Most people don’t need to worry about inheriting debt

If you’re wondering whether you’re liable for your loved one’s debt, the short answer is no. Debt generally does not get passed down to heirs.

Creditors typically won’t tell you that, and they often depend on your sense of duty to pay off those debts. They may be kind and sympathetic, but ultimately their job is to cajole you into paying.

There are exceptions in which you might be expected to pay up. The Federal Trade Commission cites four instances in which you might be on the hook for a debt after your loved one dies:

  • You co-signed on the debt.
  • You live in a community property state. (More on that a little further down in this story.)
  • You are the surviving spouse, and state law requires you to pay certain debts, such as health care bills.
  • You were legally responsible for handling the estate but did not do so in accordance with applicable state laws.

Estates are liable for debt

While you’re generally not on the hook for your loved one’s debt, the deceased’s estate generally is. In other words, your loved one’s remaining assets often must be used to pay any outstanding debts. Creditors may file claims against estate assets in court to help ensure those claims get paid.

As Money Talks News founder Stacy Johnson says:

“When a person dies, their estate is born. And that estate settles up. It pays its debts, then distributes what’s left to the heirs. If there’s not enough to pay the debt, well, the lender loses.”

If an estate doesn’t have enough money to pay off creditors, it’s considered insolvent. In that case, the unpaid debt should disappear. However, that won’t stop some companies from calling you for payment, particularly if you’re the surviving spouse.

Stacy continues:

“The bottom line is this: Don’t pay debts you don’t owe. And when in doubt, talk it out — with a lawyer.”

A final note about estates: It’s important to note that not all assets are considered part of an estate. Those excluded from an estate are technically known as “nonprobate assets.” Typically, they include assets that have a beneficiary or are jointly owned.

In other words, you don’t have to worry about your spouse’s life insurance policy being wiped out to pay off his or her credit cards.

Community property states have different rules

Generally, spouses aren’t responsible for the individual debt of a husband or wife. So if John Doe opened a credit card in his name alone, widow Jane Doe wouldn’t be responsible for paying it off — in most states.

That’s because most states have adopted a property ownership system known as “common law,” according to the Internal Revenue Service.

The federal agency says of this system, “The theory underlying common law is that each spouse is a separate individual with separate legal and property rights. Thus, as a general rule, each spouse owns and is taxed upon the income that he or she earns.”

It’s a different story if you live in one of the nine states that goes by what’s known as “community property law.” In these states, if John Doe opens a credit card in his name, the debt becomes both John and Jane Doe’s responsibility.”

Spouses are “considered to share debts” in community property states, as the IRS puts it. The agency continues:

“Depending on state law, creditors of spouses may be able to reach all or part of the community property, regardless of how it is titled, to satisfy debts incurred by either spouse.”

The nine community property states are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

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