A spouse’s death creates a difficult and demanding time for the surviving partner. As much as you might want space and time alone to process your grief, you may have certain responsibilities related to settling your deceased spouse’s affairs, including paying off their debt.
Most Americans have some type of debt. The obligation to pay debts does not necessarily go away when a person dies. While most debts are paid by the deceased’s estate (money and property owned by the decedent at their death) and do not transfer to a surviving spouse or other beneficiaries, in some cases you may be responsible for paying off your deceased spouse’s creditor claims.
If the legal duty to pay off a spouse’s debt does fall to you, it has implications for your own finances, so you will want to be clear on what the laws are where you live. If debt collectors contact you, know that you have rights as well. You should discuss questions about your debt payment obligations and rights with an attorney who specializes in estate planning and administration.
Debtor Nation
About 80 percent of Americans have some type of debt, from credit-card debt and student loans to mortgage debt and personal loans.[1] An estimated 13 percent of Americans with debt expect that they will never pay it off during their lifetime.
The average American has more than $90,000 in debt.[2] Collectively, Americans owe $14 trillion. More than half of this amount is mortgage debt, which is not surprising, since a house is the largest purchase most Americans ever make. What may be surprising, however, is that people forty-five to fifty-four years old hold the greatest average debt. While Gen Xers have the largest average debt balance ($135,000), Baby Boomers, many of whom are at or near retirement age, hold the next-largest debt load (nearly $100,000). Members of the Silent Generation (age seventy-five and over) owe about half as much as the average Millennial, but people in the highest age category still have significant debt, owing an average of more than $40,000.
In short, debt does not discriminate by age. Even as people near the end of life, they can struggle financially. And when a debtor passes away, questions arise for their surviving loved ones.
Probate and Debt Payment
Before we delve into a surviving spouse’s possible debt obligations, a brief primer on how debt is handled after a death is useful.
The legal process for distributing a person’s property after they die is called probate. During probate, estate assets (everything a person owned at the time of their death) are distributed according to the person’s will, if they had one, or to their legal heirs. But first, debts are paid. The remaining assets are then passed on to heirs or beneficiaries.
Assets such as life insurance policies and other accounts with a named beneficiary, assets in trust, and jointly owned property are not subject to probate. In addition, each state has different rules for prioritizing the order in which debts must be paid. Usually, the estate pays funeral expenses and estate administration costs (e.g., court fees and attorney fees) first, followed by taxes and then other forms of debt, such as loans and credit card balances.
This explanation of how probate works is, of course, extremely simplified. An attorney specializing in estate planning and administration can fill you in on the complete process and what is expected of you if you are named the estate administrator (the person in charge of overseeing the probate process and working with the probate court).
When You May Be Liable for a Spouse’s Debts
An estate that lacks the money to pay off its liabilities is known as an insolvent estate. There may be nothing a creditor can legally do to collect a debt from an insolvent estate, and the debt could just go unpaid. But, in the following situations, you may be on the hook for your deceased spouse’s debts:
- You cosigned for a loan.
- You are a joint account holder on a credit card (not merely a spouse who is an authorized user).
- You live in a community property state that considers a couple’s assets and debts to be jointly owned by both spouses.
There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, couples who sign a special agreement are considered to be living in a community property state. If you live in one of these states, the debts your spouse incurred during marriage are legally also your debts.
As a result, if the estate is insolvent and cannot cover its debts, you may be personally liable for paying them, even if they were exclusively in your spouse’s name. Creditors can come after you for debts such as medical expenses and outstanding credit-card balances. They could even have the right to garnish your wages, put a lien on or seize your property, or take money from your bank account.
Exceptions apply to the shared-debt rules of community property states. Generally, you are responsible only for debts that you took on as a member of a married couple. That is, any debt your spouse incurred before you were married is generally not yours unless you explicitly agreed to take it on. Also, you may not be responsible for a spouse’s debt if you were legally separated when they passed away. In addition, property that you received as a gift or inheritance is typically considered your separate property and may be protected from your spouse’s creditors. Check with an attorney specializing in estate planning and administration for guidance on specific community property rules in your state.
Spousal Debts and Dealing with Debt Collectors
Unless you live in a community property state or are otherwise legally obligated to pay your deceased spouse’s debts, you should not have to worry about spousal debt. But debt collectors may contact you anyway.
Creditors could attempt to collect the money they are owed from assets that pass to you outside probate. They might even try to sue you personally to collect the debt. Neither of these tactics will work, but simply ignoring a legal filing is a bad idea. You may need to hire an attorney to prove that you are not liable for your spouse’s debt.
Debt collectors do have the right to contact a deceased person’s spouse to find out who is authorized to pay the estate’s debts, according to the Consumer Financial Protection Bureau.[3] However, the bureau adds, they cannot represent that you are personally responsible for paying the debt unless you are legally obligated to do so.
There are rules to debt collection under federal law. As a debtor’s surviving spouse, you have the right to tell a debt collector to stop contacting you. After you have made such a request in writing, they must end communications with you. However, they can still try to collect the debt from either you or the estate with an official filing.
Any debt that you do not personally owe should not affect your credit score, but a debt collector could improperly report your spouse’s debts to a credit reporting agency under your name. Should that happen, contact the credit reporting company and file a dispute to get the erroneous information removed from your credit report.
Talk to an Estate Administration Attorney about Dealing with Spousal Debt
After the loss of a spouse, the grieving process can be complicated by the probate process and lingering questions about debt and finances. Though you may not have to pay your spouse’s debt, you may have to serve as their personal representative, executor, or administrator and deal with creditors. To best honor your spouse’s legacy and protect your own rights, it helps to understand the laws around estate administration, unpaid bills, and creditors.
Are you unsure of your rights and obligations regarding a spouse’s debts? An estate administration attorney can answer your questions and advise you on which steps to take next. Contact us to set up an appointment.
[1] American Debt Statistics, Shift Credit Card Processing (Mar. 2021), https://shiftprocessing.com/american-debt/.
[2] Megan DeMatteo, The average American has $90,460 in debt—here’s how much debt Americans have at every age, CNBC (Nov. 18, 2021), https://www.cnbc.com/select/average-american-debt-by-age/.
[3] Am I responsible for my spouse’s debts after they die? Consumer Fin. Prot. Bureau (May 16, 2022), https://www.consumerfinance.gov/ask-cfpb/am-i-responsible-for-my-spouses-debts-after-they-die-en-1467/.
