by Tricia
A reader found my site by asking that question in a search engine. It got me wondering, though, what will happen to our debt if either me or my husband passes away? It’s not a fun thing to think about, but the more I thought about it…the more I had to find out the answer.
I did some searching on the web, and here’s what I’ve come up with.
If I passed away, my husband is in no way obligated to pay off the debt that is only in my name. Now, there is one credit card that we have that is a joint account. In that case, my husband would be obligated to pay that debt because his name is on the account as well. At the moment, our debt is separated (except for the mortgage) and at least the credit card debt is split between us fairly evenly.
What the creditors will do, however, is go after my estate (assets will be sold) to pay the debt in my name. Things here get a little fuzzy. It appears that creditors can go after 1/2 of our house because it is in both of our names. This is where many sites (myself included :)) will say to consult an estate lawyer.
So, in general, it looks like family members cannot be held liable for another family member’s debt when they die unless there is a joint account. But the cards will go after the estate.
Things are different for those married in community property states. I was able to find one little snippet for those that live in community property states. It looks like in those instances the surviving spouse can be held liable for the other spouse’s credit card debt regardless of if their name is on the account.
After learning about this, I guess I feel a little bit better knowing more, but really I don’t know that much more. Something as simple as credit card debt can get pretty complicated after death with going after an estate and personally it’s not something I would like to put my husband through. I guess this can just add to the motivation to just get that debt paid off! 😉
NOTE: Please, please, please, if you ever find yourself in the situation where a loved one dies, make sure you contact someone who really understands the law in this situation. What I have written above is information I have found from other websites and is a general overview. None of the other websites appear to have their text written by lawyers. As for me, I’m pretty far from a lawyer LOL.
Here’s where I found some info: Ask Metafilter, The Dollar Stretcher, Home Loan Learning Center.
And some credit card companies have some sort of protection that you can buy that will pay off the entire balance should you die. A friend of mine shared a credit card with her Dad and when he passed away, she didn’t realize he paid for that protection so the debt was all paid off.
I just love your blog! I’ve read nearly all your archives and you’ve really inspired me. There’s something about the idea of “publicly” talking about debt and planning that has really motivated me. I started my own and will join in the land of personal fiance blogs.
Thank you for the inspiration! I’m linking to you and will ready you each day. 🙂
This is something that’s going to vary by state based on community property laws, at least for spouses. The issue with them coming after the estate is also one of the reasons people set up trusts – money in the trust can be protected from creditors in this situation.
This is why it’s very important to have life insurance in place. My husband and I currently have a high amount of consumer debt, but have protected each other in the event that one of us dies through term life policies. It may cost a little per month, and it’s money that in the event we both live, we’re not going to ever see again. But I take great comfort in knowing that if I died, my husband could completely pay off all of our joint and individual debt obligations, with extra to spare.
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What happens if a person who passes does not have any assets (house, car, etc.) and does not have life insurance? and let’s say the living spouse has some savings in the bank. Could they go after that money?
My father passed away recently and he had a few hundred dollars worth of debt on his credit card. We paid it right away, just so that we avoided any of the potential pitfalls than can come from the situation.