My husband of 45 years recently died after a lengthy illness and the other day I received a call from a debt collector. The caller said that my husband owed almost a thousand dollars in unpaid telephone charges. I was unaware of this bill and told him I was not going to pay it. He said that because I live in Idaho, I do not have a choice. I have to pay it because Idaho is a community property state. Is this true?
Yes. While death is as certain as taxes, it does not wipe out debts, especially if you live in a community property state, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin (community property law also applies in Alaska in certain circumstances). In these states, a husband and wife are responsible for the debts of the other. This includes debts that remain after death and means that a surviving husband or wife is responsible for paying back the bills of a spouse even after that spouse dies.
Most people leave unfinished business when they die. Not only must their property be distributed or disposed of, someone must pay their outstanding bills, as well. The person who makes these decisions is the executor. The executor is responsible for putting the affairs of the deceased person (decedent) in order, including paying off the decedent’s creditors.
The executor starts by figuring out how much property the deceased person had upon death, called the estate. The estate includes all the decedent’s property, such as houses, cars, and personal property, as well as household possessions. The executor then calculates how many bills the decedent still owed and pays the remaining bills out of the estate. If cash is available, the executor will likely use it to pay creditors. If it is not available, the executor sells the property and uses the proceeds to pay the bills.
In most situations, friends and relatives are not responsible for the decedent’s bills if there is not enough money to pay them. In fact, it is illegal for creditors to try to collect the deceased person’s debts from anyone else. There is an exception, however, if the decedent was your spouse and you live in a community property state.
In community property states, a husband and wife are each equally responsible for paying each other’s debts as long as one of them acquired the bill during the marriage. It doesn't matter whose name is on the bill. As long as one spouse owes money to someone else, that creditor can sue and get a judgment against both the husband and the wife. For example, if the husband likes to gamble and racks up a $50,000 poker debt, the wife is also responsible for paying back the casino or card room.
The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Spouses in Alaska can also declare that certain assets are community property assets.
Spouses are only responsible for each other’s community property debts, which are bills incurred during the course of the marriage. Spouses are not responsible for each other’s separate debts, however. These are the bills that the spouse already had before the marriage. You do not have to pay your deceased spouse's debts after he or she dies. (Learn more in Debt & Marriage: When Do I Owe My Spouse's Debts?)
If your deceased spouse’s debts are significant and you do not have the money to pay them, you have other options available.
If you do not have the money to repay your deceased partner’s debt, you might consider consulting with a bankruptcy attorney. If you qualify for a Chapter 7 bankruptcy, it is likely that you can get rid of many, if not all, of the bills. Debts such as credit card debts, medical bills and personal loans are often discharged (eliminated) in bankruptcy. (Learn which debts are eliminated in Chapter 7 bankruptcy.)
It is unnecessary for many retired people to file bankruptcy, however. This is because creditors cannot garnish most retirement accounts and social security benefits. (If you have significant equity in your home, cash in bank accounts, or other property, however, creditors can go after that.) When creditors are unable to access a retiree’s funds, there is often no need to file bankruptcy to have the debt erased. The only problem with this approach is that the creditors can continue to call, something many retirees find stressful. (Learn more about what is means to be judgment proof.)