Am I Liable for My Deceased Spouse's Debts?

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READER QUESTION

My wife died with $17K in debt. Am I liable? Can the credit card company put a lien on my house for the debt?

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Bills.com Resident Expert
Feb 01, 2012
BILL'S ANSWER

My condolences on your loss. If you remember anything I am about to write, please let it be this: Do not believe legal advice from collection agents. The legal advice collection agents tell people is usually incomplete or wrong, as is always self-serving.

Deceased Spouse's Debt

Some people assume a decedent's debt is forgiven or possibly written off by creditors. The law does not work that way, with the exception of federal student loans. However, spouses or other relatives are not responsible for the decedent's debt automatically, either. Many collection agents take advantage of a debtor's grief and ignorance of the law to imply the family must pay the decedent's debt, but that may not be the case.

When a person dies with a will, the will controls the financial affairs of the decedent's assets, which is called the "estate." A will distributes assets, not debts. However, before any assets can be distributed to the heirs, all known debts must be paid by the executor. Therefore, the executor will sell assets in the estate to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will.

If a person dies without a will, this is known as "dying intestate" in lawyer-speak. In this situation, the court appoints an administrator to handle the distribution of the decedent's assets according to the laws of the state. As with dying with a will, assets are distributed after debts are paid.

Here is a key point: If the estate is insolvent the creditor has no legal right to collect the debt from family members, children, or friends. In most states, the creditor cannot collect from the spouse either. However, in community property states, the question becomes more complicated.

Deceased Spouse's Debt in Community Property States

Community property states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally speaking, in community property states, debt incurred by a spouse for the benefit of the family is considered a "community" debt, and therefore the spouse is responsible for repaying that debt.

However, no two community property states use exactly the same laws. As a consequence, if you live in a community property state and have a spousal debt issue, it is imperative that you consult with an attorney in your state so that you understand your rights and liabilities in your particular circumstances.

Your Questions

Alabama is not a community property state, so my discussion about community property law does not apply to you because you stated you live in Alabama. You did not mention whether your wife died with a will. I will assume she died intestate because you did not mention it. In a process called probate, the administrator will review all of your wife's assets and debts. You mentioned she had "credit insurance" on the vehicle, which I will infer means the balance of the car loan was paid when your wife passed away. The vehicle is an asset in her estate, unless your wife had your name on the title with hers. If your name is on the vehicle's title, the vehicle became yours upon her passing.

For the sake of argument, let us assume her name was on the vehicle title alone. Let us also assume she had no other assets. And finally, let us assume the fair market value of the vehicle is $17,000. If that is the case, the administrator will sell the car, and pay the credit card company the balance owed, leaving you and her other heirs nothing. However, if the vehicle is worth more than the balance on the credit card account, then the remainder after paying off her debts will be distributed to your wife's heirs. On the other hand, if your wife's vehicle is worth less than $17,000, the administrator will sell it, give the proceeds of the sale to the creditor, and look elsewhere in your wife's estate for the balance.

Spousal Debt and Real Estate

I am concerned about the title of your home. You used the phrase "We own a home..." This implies both of your names are on the title.

The exact language used in conjunction with the names on the title is extremely important. If the language on the title is "John Doe and Jane Doe, as joint tenants" or "John Doe and Jane Doe, as joint tenants with right of survivorship" then your spouse's interest in the property passed to you at the moment of death automatically.

Similarly, if the phrasing of the title is something like, "John Doe and Jane Doe, with a tenancy by the entirety" then your spouse's interest in the property passed to you at the moment of death automatically.

With either a joint tenancy or a tenancy in the entirety, because your spouse's interest passed to you without going through the probate process, the house is not an asset of your spouse's estate. That means that the creditor's have no legal means of stating any claim against your house -- there is no way for them to attach a lien to the house.

On the other hand, if the phrasing used on the title to the house is something like, "John Doe and Jane Doe as tenants in common," then we have a more complicated situation.

Tenancy in Common

In a tenancy in common, each person on the title has an undivided interest in the property. Each person can dispose of their share of the property without it affecting the ownership rights of others. Unlike a joint tenancy or a tenancy in the entirety, upon death the decedent's interest does not flow to the other owners instantly. Instead, the interest is considered an asset of the estate, and is distributed according to the decedent's will or the state's intestate distribution rules.

In this case, if the house was titled as a tenancy in common, you would retain your interest, then as spouse receive one-half of her interest. Her remaining interest would proceed through probate. If estate was debt-free, the remaining interest would be distributed to her other heirs, such as any children she may have had.

If the house was titled as a tenancy in common, and your spouse's estate had outstanding debt, then it is within the administrator's power to sell the interest to raise funds to satisfy the debt.

As you may have gathered, the rules regarding how a property may be titled are intricate (they are almost universally hated among law students, too, but I digress.) For that reason, I recommend you take the documents regarding your spouse's vehicle loan, her recent credit card statement, the title to your property, and any other documents that you think may be important regarding her finances to an Alabama attorney experienced in property or probate law. He or she will review the entire situation and give you a more detailed and precise discussion of your rights and liabilities.

For additional general information, see the Federal Trade Commission documents Paying the Debts of a Deceased Relative: Who Is Responsible? and FTC Issues Final Policy Statement on Collecting Debts of the Deceased.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (34)


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Deena S.
Brooklyn, NY  |  January 30, 2012
My grandmother died in December 2011 without a will (NY Resident). She had a home (all mortgages paid), a car, 1 bank account and a college fund for her great-grandchild (my daughter). So far, her medical, credit & misc. debt totals $17,000. Will we have to tap into the college fund to pay off her debt? We really don't want to sell the house.
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Bills.com
January 30, 2012
Her estate is liable for her debts. You need to speak with an experienced probate attorney, to find out the best way to satisfy her creditors and use her assets wisely and to your best advantage.
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Sara P.
Philadelphia, PA  |  December 27, 2011
Hi. My father passed away a few months ago, and he left everything in his will to my mother. We live in PA, a non community state. My mother received most of everything - her name was on all property, except: her name is not on the deed to a rental property. They were married almost 35 years, and although the property was purchased by my father before their marriage, she has been paying the mortgage on the property, as well as upkeep, etc. for the entirety of the marriage. Now, she is stuck paying the mortgage which has skyrocketed b/c no one will give her home insurance since she is not on the deed. She was advised to open an estate for the house, but will receive nothing from it due to my father's debt. So, my question is: is the house hers since it was left to her in the will, even if her name is not on the deed? Is she stuck paying the mortgage without getting anything out of the estate? She has a lawyer, but I have encouraged her to seek advice from another source as he is unreliable and not forthcoming.
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Bills.com
December 28, 2011
I am not a lawyer, so I cannot give you legal advice. If you are unhappy with your lawyer, then it might be prudent to look for another one. Base your decision on the lawyer's competence and not the answer you receive. You do not mention if your mother is a borrower on the loan. If she is, then she is liable for the loan, and if there is a deficiency balance, after selling the property, then she very well could be liable for that.

In any case, the transfer of title and paying of the debt, should be done through an estate lawyer. If the deed and the loan were in your father's name, then his estate would be liable for paying off the loan, at the time of the transfer. If the sale brings insufficient funds, then the estate would be liable to pay, if there are other sources of money in the estate. In any case, seek advice from a lawyer who practices estate law.
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John D.
B/o Pottstown, PA  |  November 12, 2011
My father recently passed away. My mother is still living. The will leaves everything to my mother. My father had a car, with a loan that still has two more years of payments. The title and loan were in his name only. My mother wants to sell the car to someone. It would appear we need to put the title of the car in her name. But we do not have the title - the lienholder (credit union) has the title since there is still a loan on the vehicle. How can she sell the vehicle without having to pay off the loan first to get the title? I think the state (PA) has an option to change the title to the estate - should I do that?
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Bills.com
November 14, 2011
The procedure used to transfer title will depend on the manner that the estate is executed. Read Pennsylvania's Department of Motor Vehicles fact sheet about transferring title after death of owner. If your mother wishes to sell the car, then you must contact the lender to deal with paying off the loan and discharging the lien. Contact your lawyer for any legal assistance needed.
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Christa R.
Riverside, OH  |  November 09, 2011
My mother passed away in 2004. We didn't go through probate and now my father has passed. The attorney says we have to close my mother's estate first. She has a judgement for $16,000. We just discovered will we be responsible for this out of my fathers estate.
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Bills.com
November 09, 2011
Follow your lawyer's advice. Your situation illustrates how important it is for every estate to go through probate.
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Amy T.
Holderness, NH  |  October 12, 2011
my mother is naming me executor of her will, and she will probably pass soon. but she has barely any assets, none that i cant even think of that would generate any money to pay off her hospital debt.. no car, no house, no stocks bonds or savings, no life insurance... whats going to happen to the quarter of a million dollars in hospital bills after she passes? i dont think i will personally be responsible for them but with no assets there is no way to pay off debt so then what?
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Bills.com
October 12, 2011
You need a quick education in your mother's state probate laws. This is a vast oversimplification, but think of probate as a bankruptcy filing. All of the assets are accounted for and tallied, and the same is true for debts and liabilities. The liabilities are ranked and paid until all of the assets are exhausted. Unpaid and underpaid creditors are notified the estate's assets are exhausted. If there are more assets than liabilities, then the heirs and people mentioned in any will are paid.

Again, what I wrote above is simplified to illustrate the process in general. A lawyer in your mother's state who has probate experience can guide you through the process in detail.
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Celia P.
Jacksonville, FL  |  September 29, 2011
I apologize in advance because I know this might be one of the most difficult situations to answer. My father, who will be found Not Guilty by Reason of Insanity, took the life of my mother and I am their only child. At the moment, my 69 yr old father is in jail. Due to being in total shock for the past year, I did absolutely nothing with their estate. I let the house foreclose because there was no equity in it and I allowed their car to be repossesed. My parents were married for 43 yrs and had a joint bank account, and that was it when it came to assets other than the house. Do I need to do a probate? I know my mother had a credit card in her name that had about $7,000 on it and some hospital bills. Am I going to get in trouble for not filing for probate? At the time of death, my parent's had a savings acct with $15,000 in it. Since I know that my dad knows he will spend the rest of his life either in prison or in a state mental institution, can my dad gift some of that money to me and my children even though we haven't paid off my mom's credit card debt or hospital bills? As you can imagine, this has been the most traumatic experience and even though I am an educated woman, I feel totally lost. I don't want to do the wrong thing and get in trouble. On the other hand, I spent years taking care of my parents and I would much rather use the money than to have it disappear to creditors. Thank you in advance for your time in answering my question.
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Bills.com
September 30, 2011
Your situation is sad, tragic, and very distressing, but from a legal perspective your financial issues are not unique. Consult with a lawyer who has probate experience. He or she will help you sort out the assets and liabilities in your mother's estate, and can help you maximize the amount your father can gift to his offspring. I doubt you will "get in trouble" for probating the estate at this time, but the longer you wait the more complicated issues can become with creditors.
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Russ W.
Philadelphia, PA  |  September 15, 2011
My wife has been deceased about 4 yrs. She filed as a single tax return. I also filed as a single. Her name is on the title. The city of phila is saying she owes 27000 in back taxes that I am responible for . Is that correct
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Bills.com
September 15, 2011
Did the decedent's estate go through the Pennsylvania (or some other state's) probate process? If so, consult with the executor of the decedent's estate to learn if and how the decedent's tax liabilities were resolved. If the decedent's estate was not probated, then consult with a Pennsylvania lawyer who has probate experience. He or she will advise you accordingly.
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Jena R.
T/o North Bergen, NJ  |  September 07, 2011
My mother passed away in January with no will. I went through the probate process with the only asset being a home. I have been living in this house and planned on having it transferred to my name. My fiancé and I are expecting a child in November and have settled down here. Recently I received letters in the mail from EIS saying that 4 different credit card companies are seeking in excess of $10k . Can they take the house from me? What if it is already in my name? I am an only child.
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Bills.com
September 08, 2011
My answer assumes the four delinquent credit card balances were in the decedent's name. If my assumption is correct, send copies of the letters you received from the collection agent to the lawyer, administrator, or executor who probated the estate. He or she will contact the collection agent and explain the estate was already probated under the laws of the decedent's state, and that their not making a claim to the estate in a timely manner voided their rights to collect from the estate.
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