Are You Responsible For Your Spouse's Debt If They Die?

The death of a spouse can be an unspeakably painful experience. For the surviving spouse, not only are they left to grieve the loss of a partner, but they also might end up dealing with debt. That's right, during the grieving process, lenders could come knocking on your door for any outstanding debts left behind by the deceased. Depending on several factors, including the type of loan and even what state you live in, debt collectors could have legal access to your property (like your home or car) and your assets (including things like jewelry and furniture). Depending on the law where you live, you could end up on the hook for a lot of debt that isn't even yours.

While no one generally wants to think about estate planning (and younger couples might not think they even need to), it's important to understand the laws that can affect your debts. Leaving behind debts can negatively impact a person's entire family after they die. While there is certainly a lot to know about what happens to your debt after you die, specifically understanding the burden this debt can leave behind for a surviving spouse can be the most important thing to research. A surviving family can face the loss of their home, car, and possessions in addition to the loss of a loved one, so let's dive into what to know about debt after death and how it can impact a surviving spouse.

Debt and estate considerations

The estate laws for your state can be an important consideration when it comes to handling debts after a death. Since debts will typically be paid out of the deceased's estate, you should have a clear understanding of just how liable your family might be. Find out if your state requires your chosen executor or administrator to pay your outstanding debt with jointly owned property. Since certain states legally require an executor to use property that might be owned by a surviving spouse and/or children, your family could end up losing their home after you die. Knowing the specific estate and executor requirements in your state is extremely important when estate planning, so make sure to choose an executor you trust.

Also, certain debts have different priority when it comes to collecting on debt from an estate. For instance, secured versus unsecured debt can have different ways of collecting. Since secured debt is tied to specific physical collateral (like a car or house), the bank and/or lender can seize and resell the property in question to help pay back the owed debt. Unsecured debt, on the other hand, is not tied to collateral and is therefore more difficult for a lender to collect. Unsecured debt can make a claim on an estate after someone dies, but depending on the state laws governing the estate, as well as the amount of assets actually available within that estate, they might end up empty-handed.

Debt in community property states

For married couples, any joint account can and will leave the responsibility of the account's debt to the surviving spouse, but remember this doesn't apply to authorized users, so any children who might be able to access the account won't be legally or financially liable. With that being said, perhaps one of the most important things to know about potential spousal death is whether or not you live in one of the nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. For those who do, lenders can go after a family's assets (including their home) in order to pay off the deceased's outstanding debts even if the surviving spouse wasn't a co-signer or joint owner of the debt in question. Depending on the surviving spouse's finances, they might end up having to sell or give back their home.

In community property states, the types of debt lenders can pursue from a surviving spouse include everything from student loans to car loans to medical bills. What's more, for divorced couples in these states, lenders can, in fact, still come after the surviving ex for a loan or other debt incurred during the marriage. For non-community property states, note that some loans have death clause agreements in the contract (for instance, many auto loans) so always check the fine print of any debt or loan you incur to see just what your family might end up being liable for if you should die.