What Happens to Joint Debts When You Pass Away?
Deborah and Thomas did just about everything together during their 42-year marriage. They ran a successful real estate agency, purchased homes together, and furnished those homes, and bought or leased numerous automobiles. When Deborah passed away last year, Thomas had the job of settling her estate. First, he looked at their joint debts – mortgages, credit cards, and personal loans – and wondered how to handle them.
In general, no person is responsible for paying off the debt of someone who has died. There are exceptions, however. People who may be responsible for the debt include:
- Co-signers on loans.
- Joint account holders on credit cards. (Authorized users are typically not required to pay the debt.)
- Spouses required by law to pay certain debts.
- Surviving spouses in community property states.
- Executors of estates with property that was jointly owned by the decedent and the surviving spouse.
Since Deborah and Thomas lived in Arizona, a community property state, most debts incurred during their marriage became community debt. Some of Deborah’s debts, then, may be paid with community property.
Certain types of debts do not disappear when the debtor dies.
When a loan is secured by the item being purchased with loan proceeds, the debt is called a secured debt. These debts must still be paid after the debtor passes away.
Jointly-owned debts also survive the death of one debtor. This doesn’t just apply to married couples. If a mother and son take out a loan together or have a jointly owned credit card, the debt survives the death of one of them.
For example, let’s say that Deborah and Thomas owned a house. Their mortgage is secured by the house, which is jointly owned by Deborah and Thomas with right of survivorship. When Deborah died, Thomas simply kept paying the mortgage. When he passes away, any remaining balance on the mortgage may be paid by his estate, unless he has made other arrangements. Hopefully, he will discuss his estate planning needs with an attorney and leave as much as possible to his and Deborah’s children.
Have questions and concerns about debt?
It can be difficult to tell if a debt is still owed. Talk to an attorney so you don’t pay debts that are not your responsibility.
At Keystone Law, we use our estate planning experience to help clients like you make careful decisions about their estate plans. Call us at (480) 418-8448 to set up an appointment. Although located in Chandler, we also work with clients in the surrounding communities like Mesa, Sun Lakes, Gilbert, and Tempe.