ADVERTISEMENT

Spousal death and debt

When a spouse dies, how do you pay off their debt?

By Alan Klayman

Maturing Loans
Maturing Loans, Alan Klayman
Alan Klayman is CEO of Klayman Financial LLC. He served as a vice president at Fidelity Investments, worked as a financial planner for American Express, and built fixed income strategies on Wall Street at The First Boston Corporation. At CreditCards.com, he writes Maturing Loans, a weekly feature in which he answers readers' questions about retirement and debt issues.

Ask a question.

Question for the CreditCards.com expert

Dear Maturing Loans,
My husband of two years just passed away from a heart attack. He has left me a large amount of hospital debt, as well as some credit card debt that I knew nothing about. I took out an equity loan on my house to pay for a new roof and took extra to pay for his debt, which he had acquired before we met. About a month before his death, he had a mild heart attack, and then about six weeks later he passed away from a massive heart attack. Meanwhile he had every intention to change his insurance policy to my name, which he had on his to-do list on his desk, but unfortunately, time did not allow this. Now I am stuck with his debt and his parents are getting the insurance money that I need to pay his debt. His mother and sister feel I should get this money and his father is fighting me. Do I have a chance in court? Please advise. We are from Nebraska. -- Carol

Answer for the CreditCards.com expert

Dear Carol,
The first thing you should do is speak to your attorney. If you do not have an attorney, find one who specializes in estates, wills and trusts. If you cannot afford an attorney, many communities have legal aid available for people that cannot afford legal services.  

List out your debt obligations and discuss with your attorney a way to reduce the debts, if not the interest costs associated with the debts since they were last paid. The creditors will be much more receptive to working out an arrangement with you if you contact them and offer them a payment schedule. Don't avoid contacting them. 

On your way to your attorney, you should familiarize yourself with the concept of 'elective share.' Depending on where you live, you are entitled to one-half or one-third or some amount similar to that of the entire estate under certain conditions. But you need to be careful because some states, like Nebraska, can exclude certain assets like an insurance policy from the elective share calculation.

In Nebraska, you have nine months from the date of death to make this election. So do some research and compare what you are receiving versus what your elective share would be. The more of this type of information you can collect, the better your attorney can assist you and the less expensive your trip to see your lawyer will be. Many attorneys are paid by the hour, so the more information you give them the less they have to research.  But do it now, the clock is ticking.

This leads to a broader discussion of estate planning. There really is no reason whatsoever for anyone who has an annuity, a life insurance policy, an IRA, a POD account (pay on death), or any other type of account that lists beneficiaries not to review these every year and update them. That said, everyone who is married or in any type of long-term relationship where there is some legal or implied legal obligation for the care and/or protection of another, must sit done once a year and make sure that every beneficiary designation is up to date on pensions, 401(k) and 403(b) plans, and any account with a beneficiary.  This also applies for joint accounts. Accounts listed as JTWROS -- Joint Tenants with Rights of Survivorship -- and other types of joint accounts also need to be reviewed.

It is unfortunate that you face this situation right now, but others can learn from this situation and take the time to see that reviewing these beneficiary designations can save a ton of time, money, and family grief if they are done on a periodic basis.

Thanks for the question, see you back here next week.

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: August 20, 2008


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 09-25-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT