When are you responsible for a deceased relative’s debt?
Losing a loved one is incredibly painful. Being harassed by creditors looking to collect on the deceased’s debt doesn’t make it any easier.
Unfortunately, when a loved one passes away, their debt remains, and creditors continue to seek what’s owed to them. But is the debt of a deceased loved one your responsibility?
Typically the answer is no. Debt collectors may try to convince you otherwise, or manipulate your sense of personal responsibility, but by and large, relatives are not responsible for the debt of the deceased.
There are, however, exceptions.
Responsibility of the estate
First, it’s important to understand that the estate of the deceased is still responsible for any remaining debts. The exact rules and methods will be different in every state, but generally the assigned executor of the deceased’s estate will be responsible for paying back the deceased’s debt using the deceased’s available assets. Only after these debts have been cleared can the rest of the deceased’s assets be distributed to their heirs.
If the assets aren’t sufficient to pay off all of the debt, then what’s remaining simply goes unpaid.
With regards to estates, it’s also important to know that certain accounts with joint ownership are often excluded. This includes life insurance policies, certain retirement funds, and any accounts with right of survivorship or transfer-on-death provisions. That means that these exempt accounts can't be confiscated to repay the deceased's debts.
Responsibility of the spouse
Outside of the responsibility of the estate, the Federal Trade Commission (FTC) lists four instances where one may be responsible for the debt of the deceased:
- If they co-signed on the debt
- If they are the deceased person's spouse and they live in a community property state
- If they are the deceased person's spouse and state law requires that you repay a particular type of debt, such as health care expenses
- If they were legally responsible for resolving the estate and didn't comply with certain state probate laws
In most places, if your spouse opens up an account in their name alone, you bear no responsibility for that debt. Even if you’re listed as an authorized user, you are not accountable (although if you use the account after the account holder passes away you could be charged with fraud).
Certain states, however, are “community property” states. In these states, both spouses are responsible for all debts incurred during the marriage, whether your name appears on the debt or not. These states include:
- New Mexico
In these states you would be responsible for repaying your deceased spouse’s individual debts (assuming the debt was created during the marriage – anything from before you were married would not be your responsibility).
Speaking with debt collectors
Per the FTC: Collectors are allowed to contact third parties (such as a relative) to get the name, address, and telephone number of the deceased person's spouse, executor, administrator, or other person authorized to pay the deceased's debts.
That’s it. That's all they're allowed to do. Collectors are not allowed to try to talk you into paying a debt you are not responsible for. If they do, you should submit a complaint to the Consumer Financial Protection Bureau.