They have separate accounts. Is that enough protection?

Inheriting a Spouse's Debts

by Gary Foreman

Related Articles

End-Of-Life Planning Everyone Needs to Do

Estate Planning in a Second Marriage

What If Something Happened to You?

My question is about each married individual's responsibility 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, and 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.

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.

Related: Credit Card Debt after the Death of a Spouse

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 three 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 debts, but there's still one more hurdle that 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.

Need legal advice?
Visit NOLO today for your legal needs.

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 shouldn'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.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

Take the Next Step:

  • Get proactive about tackling your debt. Take these steps to get out of debt and begin the journey to financial freedom today!
  • Get more of your estate planning questions answered by visiting the Dollar Stretcher Library.
  • Get control of your financial life. Subscribe to Financial Independence, a free daily email that provides you with the tools to help you gain that control and achieve financial independence. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist for FREE!

Share your thoughts about this article with the editor.

Get Out of Debt
Stay Connected with TDS

Do you struggle to get ahead financially?

Surviving Tough Times is a weekly newsletter aimed at helping you stretch your dollars and make the most of your resources.

Debt Checklist

And get a copy of Are You Heading for Debt Trouble?
A Simple Checklist and What You Can Do About It
for FREE!

Your Email:

View the TDS Privacy Policy.

Get Out of Debt