By: Barry E. Haimo, Esq.
November 22, 2018
Can You Be Held Liable for a Spouse’s Previous Debts after They Pass Away?
We are asked this question frequently. Couples share a lot over the course of their marriage. They may buy property together. Open joint bank accounts. Incur debt as a couple.
But not all financial milestones are reached during the course of a marriage. What happens if your spouse has previous debts that they are still paying off at the time of their death?
If your spouse passes away, creditors may contact you about their debt. This contact is appropriate if the creditor is looking for information or if you are the executor of the will. If the creditor tells you that you are now responsible for this debt, however, contact your attorney.
While there are cases where you will be legally obligated to take on your deceased spouse’s debt, most of the time this is not true. And those specific cases are determined by Florida law. Do not let creditors convince you to take on debt that is not legally yours.
Why does it work this way?
Florida Is Not A Community Property State
One of the advantages of living in Florida is that you avoid the rules of being in a community property state. Residents of the nine community property states (including California and Texas) are responsible for their partner’s debt – as long as the debt was acquired during the course of the marriage.
If you are considering a move to any of these nine states, you should do a full assessment of your debts and what will happen after one of you passes away.
How Florida Handles Debt After Death
If your spouse has debt at the time of their death, the time and manner in which they acquired the debt will determine how the debt is handled.
The debt your spouse incurred before your marriage will not be your responsibility after their death. As the personal representative (executor) of your spouse’s estate, you will have to pay off debt, but only using your spouse’s individual assets or money.
This may affect the amount of money that is left over for you, but it will not take additional money out of your pocket. Once your spouse’s assets have run out, creditors cannot ask you to take on their remaining debts. You are only required to take on your spouse’s debt if the debt was incurred during the marriage and your name is on the loan or account in question.
Over the course of your marriage, you and your spouse may take out loans or open credit cards together. If you and your spouse cosign a loan together or have joint accounts, you will be required to pay off that debt after your spouse’s death.
If you are approached by creditors after your spouse passes away, you can talk to them as the executor of your spouse’s estate or direct the creditors to the appointed executor.
If Your Living Spouse Has Debt
It is never too early to create a strong estate plan that allows you to receive the assets that you and your family are entitled to after your spouse’s death. Each spouse should have a last will and testament and other planinng documents prepared. Trusts or other agreements can help to direct assets to the appropriate beneficiary with a minimum amount of taxes and without the complications of probate. It is commonly misunderstood, however, that having these documents avoids creditors or probate. They do not.
If you become aware of your spouse’s previous debts, it is even more important to seek the help of an estate attorney and financial advisor.
Joint property could be lost due to your spouse’s debt. However, if you keep property and accounts separate, it can save you a lot of stress and debt after your spouse passes away. While this is one way to protect assets, there are other, more advisable ways.
Together, you, your spouse, and your estate planning attorney can put together a strategy that aims to pay off the debt in a timely manner and prevents your own assets from taking a hit after your spouse’s death. A little planning will go a long way for you and your family and your business.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.