The death of a spouse is an enormous burden for the spouse left behind. During this time of grief and loss, a surviving spouse must also deal with financial realities. This includes finding the right way to handle the deceased spouse’s existing debt. When a spouse dies what happens to their debt?
Debt is a very common issue among Americans. Depending on the type of debt involved, it may not go away when the debt holder passes. In many cases, the money to pay off debt comes from the deceased person’s estate.
Most debts won’t pass from the deceased person to a surviving spouse, child, or another descendant. However, there are some cases where a surviving spouse is responsible or would even choose to pay off a debt.
If you think you might be responsible for a debt incurred by your deceased spouse, you need to get answers as soon as possible. Unpaid debts can damage your credit and put your financial future in jeopardy.
If your spouse has died, or if you are the executor of an estate with significant debt, you must talk to an experienced probate administration attorney to properly understand your rights and duties when it comes to probate and debt.
The Scope of the Debt Problem
Around 8 out of every 10 Americans are in debt. This includes credit card debt, personal loans, mortgage debt, student loans, home improvement loans, and more. Consumer debt, which excludes mortgage debt, comes out to around $38,000 per person. It’s not unusual for people to hold debt they don’t expect to pay off before they die.
While student loan debt draws headlines for hitting younger generations particularly hard, older Americans are also under a substantial debt burden. The average debt per American household among people 65-74 is $66,000. The more a family earns, the more debt it is likely to hold. As people build their careers they also tend to accumulate debt.
What this means is that most people leave some level of debt behind when they die.
Probate and Debt
While every situation is different, there’s a baseline treatment of debt left behind when someone passes away. Probate is the formal legal process covering how to administer an estate and distribute assets after a person dies.
If the person left a valid will, it will provide instructions on how to handle the estate’s assets. If there is no will, the rules of intestate succession will apply to distribute the assets. With a will or without, the assets left are not distributed until the person’s debt is accounted for.
Not all assets go through the probate process:
- A property that you own jointly with your spouse will not go through probate after one of you dies.
- Trusts can separate assets from the probate process.
- Life insurance and similar devices are also not a part of probate.
The rules vary by state, so working with a probate administration attorney in advance can help protect important assets from being exposed to debt collectors.
Deceased Spouse Debt: Do You Have to Pay?
If an estate does not have enough money to pay off the debt, creditors may have no legal recourse. The debt may remain unpaid forever. In some cases, however, you as the surviving spouse may be obligated to pay off the remaining debt. That can happen in the following situations:
- Community property: California is one of nine states that use the community property system. That means both assets and debts are considered the property of both spouses. A deceased spouse’s debt may be transferred to the surviving spouse depending on the exact circumstances.
- Cosigned loans: If the deceased person had a loan and you co-signed for it, then you will be responsible for the debt going forward if there aren’t enough funds to pay for it in the deceased person’s estate.
- Joint accounts: Credit cards are often held jointly between couples. If you are a joint holder on an account, the remaining balance of the debt will still be there after the death of the other account holder and you will be responsible for paying it whether the purchases were for your use or not.
If any of these apply to you, there’s a good chance you’ll have to pay off your spouse’s debt.
Call an Experienced Probate Administration Attorney Today
If you have questions about the estate administration process for someone who has died with significant debt, the Law Office of Janet L. Brewer can advise you regarding how this may impact the probate or estate administration process and outcome. Call our office at 650-325-8276 to schedule a consultation.
Please note that our office handles estate planning, probate administration, and trust administration matters only. We do not handle any legal matters involving debt collection.
