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Inheriting Spouse's Debts - The Dollar Stretcher
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Inheriting Spouse's Debts

My question is about each married individuals responsibilities in case of the death of the other. I will use my husband and I as an example.  We have separate bank accounts, separate loans, separate credit cards except for our heating utility company. Our marriage is the second for each of us. While I have established a very good credit history, my current husband has bad credit.  Will I be responsible for paying off his debts if he should die first? I have NEVER used his credit cards and my name is not on any accounts of his. Our cars are also only listed in his name or mine. Nancy

While none of us like to think about it, we should all be prepared for our own deaths and those near to us. Nancy is very smart to ask these questions now while she can still take any corrective action that's necessary.

There are two ways that you can find yourself being responsible for  another person's credit card debts. The first is if you agree to be responsible for debts incurred on the card. You'll need to sign an application for this to happen. Generally you'll be the owner/co-owner of the account or have co-signed on the account. But, you'll know if you've obligated yourself this way (unless you didn't bother to read what you were signing). In Nancy's case, it appears that she hasn't done that.

The second way that you could be responsible for credit card debts is less obvious. Let's take Nancy's situation. Suppose that she is not personally responsible for the card. Only her husband (from now on known as "Hubby") is. So if Hubby should die, the credit card company must look to his assets for payment. What does he own? Anything that's titled in his name (like the car that Nancy mentioned) is fair game for creditors. So if Hubby is not on the title to Nancy's car, the car should be safe from his creditors. So far, so good for Nancy.

Where it gets tricky is with anything that's owned in a joint account. In some joint accounts you only own your portion of the account (i.e. half of an account with two joint owners or 1/3 of an account with 3 owners). But in most, it's assumed that either party owns all of the account. In other words, either Nancy or Hubby could write a check for the entire balance of a joint checking account. In this case the credit card company would say that Hubby owned all of the checking account and claim the entire balance to pay off Hubby's credit card bill. And, they'd get the money.

Nancy has been wise to avoid joint accounts. She's gone a long way to avoiding debts that aren't her's. But there's still one more hurdle  she'll need to clear.

There's a patchwork of state laws that must be considered. For instance, your state may have a law that says that it's assumed that half the property acquired during a marriage belongs to each partner. That could mean that half of your property (including savings accounts, etc.) is available to pay your spouse's debts. Only research in your state laws will alert you to all the dangers. In some cases a lawyer will be required.

Whether Nancy needs to talk with one will depend on her circumstances. She can do the basic things herself (and for the most part she already has). Keep separate credit card accounts. Don't co-sign or guarantee any loans. Keep your assets separate.

If either Nancy or Hubby has significant assets (and, you'll need to decide what 'significant' means to you), it might be wise to see an attorney. If you come in with the facts and specific questions it should't be too expensive to find out if you have any exposure to debts that you didn't create.

As a general rule you don't become responsible for someone's debts because you're related to them. But, the exceptions to this rule can be really expensive! So find out before it's too late.

Keep on Stretching those Dollars!

Gary

Comments

 

goldenblaise said:

wow thanks to Nancy for asking a question I never thought of. and thanks gary for answering. this has given me much to think over.

cyn

February 3, 2009 3:35 PM
 

Hofmama said:

Gary--this is a situation where one should check with an attorney. In some states, debt acquired during the marriage is marital debt, regardless of who took the debt on or whether the other spouse knew about the debt, but it very much depends on the state law.

Thanks for keeping us all aware!

-Hofmama

February 8, 2009 10:56 AM

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About Gary

For more than 25 years, Gary Foreman has worked to manage money effectively. Prior to starting The Dollar Stretcher, he was a financial planner and purchasing manager. While helping clients manage their hard earned money as a financial planner, he applied commonsense, time-tested techniques during the turbulent 1980’s. The experience convinced him that you didn’t need to hit the lottery to accumulate significant wealth. Following that, Gary had an opportunity to learn more about how to get the best value for a dollar spent in the corporate world. As the Purchasing Manager for a computer manufacturer, he was responsible for supervising over $10 million in annual purchases. Gary began The Dollar Stretcher website <www.TheDollarStretcher.com> and newsletters in April 1996. Over 300,000 readers benefit from the time and money saving ideas presented in The Dollar Stretcher newsletters each week. His mission is to help people "Live Better for Less". He also provides private label newsletters for companies wishing to provide money saving information for their clients and/or prospects. Gary lives in Florida along with his wife of thirty years and their two children. Much of his time is spent working with the men's ministry of his church. One of their ongoing projects is the "Holy Smoke BBQ" which sells bbq on Friday nights with the profits going to support local foster kids and orphans. When he has a free moment you’ll find him restoring a Checker station wagon nicknamed “Two Ton” or cruising in a '65 Impala SS Convertible with doo-wops playing in the background.

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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