In addition to intense grief, the death of a spouse also comes with countless new responsibilities. From life insurance claims to funeral preparations to dealing with your deceased spouse’s will and assets, the to-do list can seem never-ending.
Talking to debt collectors is probably one of the last things you want to face when you’re grieving. Yet at some point, you may start to receive collection letters or phone calls that you need to address. In most cases, you are not responsible to pay off the debts of your deceased spouse, but you’ll want to be prepared for the scenarios in which you are.
Are you responsible for your deceased spouse’s debts?
Most Americans owe some outstanding debt when they die. So, if your spouse left debt behind debts when they passed away, it may give you some comfort to know that the situation is not at all unusual. A 2017 study revealed that 73 percent of consumers owed outstanding debt at the time of their death. The average amount of debt these people owed was just under $62,000.
The good news is that in most cases, you are not personally liable for your deceased spouse’s debts. Both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) confirm that family members usually do not have to pay the debt of deceased relatives using their personal assets. This includes credit card debt, student loans and more.
When am you responsible for your spouse’s debts?
Here’s the not-so-good news: Under certain circumstances, you might be on the hook financially for debts your spouse incurred while they were alive. For example, you might be responsible for your late spouse’s debts in the following situations:
- You were a joint borrower. If you were a cosigner, the lender or card issuer will still expect you to repay those funds after your spouse dies. “If a credit card account is jointly held, both people usually have equal responsibility to repay the debt. That means that if you co-sign a credit card or loan, and the other account holder dies, you could owe the full amount of the debt – even charges you did not make,” says debt expert Sean Fox, president of Freedom Debt Relief. In the case of a credit card, however, see if you are an authorized user only. Authorized users are not responsible for credit card debt — whether the primary card holder is living or decreased.
- You live in a community property state. In a few states, the law may require you (as a surviving spouse) to use any community property you owned with your late spouse to cover outstanding debts. Community property rules state that a debt either spouse incurs during a marriage is considered a joint debt. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In Alaska, community property is optional.
- State law requires you to pay. Some states may require you, as a surviving spouse, to pay for certain types of debt, such as medical expenses.
- You’re the executor of estate for your deceased spouse. As executor, you might have to pay the debts of a late spouse (even in non-community property states) if you owned any joint property and failed to follow state probate laws.
What happens to your spouse’s debts that you are not responsible for?
Even if you’re not personally responsible for your late spouse’s debt, the bill won’t simply go away. Your spouse (or rather, their estate) might still be responsible for the debt after death.
“Creditors seeking payment of a debt that does not transfer to a surviving spouse can seek payment from the deceased spouse’s estate. Most states have a time limit from date of death to submit a claim in the estate, generally six months to a year,” says elder law attorney Lindsay Graves, founding partner of The Graves Law Firm.
If the estate has enough money to cover the debts, they will be paid in order of priority as outlined by state law, says Graves. If a creditor can collect the money owed from your deceased spouse’s estate and has the right to do so, that may mean there is less money for beneficiaries after the fact. In certain cases, you might even have to tap into assets or sell them (i.e., bank accounts, real estate, stocks, etc.) to cover unpaid debts.
Certain estate funds and assets may be exempt from creditors as well. Life insurance policies, disability benefits, employer-sponsored plans and retirement accounts, for example, are often off-limits as long as a beneficiary is designated. Also, if the nonexempt funds from your late spouse’s estate are exhausted, any remaining creditors might have to accept a loss (unless one of the exceptions above applies to your situation).
What do you do if a debt collector contacts you about your deceased spouse’s debts?
Even when you’re not legally liable for a deceased spouse’s debt, you may still be pressured by collectors to pay. But if you don’t live in a community property state (and don’t believe there are any other reasons you could be held responsible), you can tell the debt collector that you know you are not responsible.
“Debt collectors do sometimes contact relatives of the deceased to try to collect payment but family members do not inherit a debt,” says Fox. “Instead, a person’s estate usually must repay all creditors. Whatever funds are left in a person’s accounts will be used to repay debts. In some cases, the estate may need to sell assets to repay creditors.”
You can also provide debt collectors with a copy of your spouse’s death certificate and ask the company in writing to stop contacting you. It’s best to send this information via certified mail and keep a copy of your request for your records.
Once you ask a debt collector to stop contacting you, the Fair Debt Collection Practices Act protects you. Any future communication regarding the debt should stop, unless the debt collector decides to sue you and is informing you of that fact. If a collector continues to contact you after you ask it to stop in writing, you can report the company to the Federal Trade Commission or the Consumer Financial Protection Bureau.
Will not paying your spouse’s debts affect your credit score?
Generally speaking, a spouse’s debt should not impact your credit score. However, there are exceptions to be aware of.
“Not paying your spouse’s debts will not affect your credit score unless you are a joint owner or co-signer on the debt,” says Graves. “You cannot be penalized for not paying a debt you are not responsible to pay.”
How can you plan ahead to avoid spousal debt after they die?
Proactive legal and financial planning while each spouse is alive can help avoid a situation in which one partner is forced to assume the debts of a spouse after their death. This effort should begin with taking inventory of the debts each partner holds and confirming the responsible parties on each account.
“Have an honest discussion with your spouse about your joint debt position,” says Katie Bossler of the non-profit GreenPath Financial Wellness.
Once you’ve identified all debt, develop a plan to aggressively pay it off. This could include finding ways to supplement your income, consolidating the debt, paying more than the monthly minimums, and finding ways to get the interest rate reduced so that the debt can be paid off as soon as possible, says Bossler.
Yet another tool that can help address spousal debt is life insurance, which can be used to pay off any debts after death. Establishing a trust fund is still another tool that can be used to protect assets from creditors after one spouse dies.
“In the event that a creditor seeks and obtains a judgment for payment, assets in certain types of trusts may be unreachable to satisfy the judgment,” says Graves. “It is important to see a local attorney who understands your state rules and can help you plan accordingly.”