Widow likely isn't liable for late husband's debts

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert

Dear Opening Credits,
My husband passed away the end of January 2008. He left several credit card debts in which I was only the authorized user. I live in California. I was told by an attorney that I was not responsible for the debt. There was no estate, my husband had no life insurance policy, and I had no savings. Now I received a form 1099-C for Cancellation of Debt that was addressed to my husband, and I received one addressed to the estate of my husband. Am I responsible for these? Thank you for any help you can give me. -- Carol

Answer for the CreditCards.com expert

Dear Carol,
Please accept my condolences. The death of a spouse is not only emotionally devastating; it also tends to leave behind an array of difficult financial and legal problems.

Regarding the 1099-C Cancellation of Debt notice, it is true that the balance due (and there is one -- the amount that the creditor could not collect is considered income in the eyes of the IRS) would normally be extracted from your husband's estate. However, since he had no assets or income to speak of when he passed away, the bill is most likely uncollectable. It's that old "you can't get blood out of a stone" concept.

The reason you don't have to pay for that tax liability is because of the way the credit card accounts were originally granted. Long ago, when your husband applied for the cards, he must have done so using just his credit history and financial and personal information. For whatever reason, he kept you out of the picture with this particular card. Because of this, the credit issuer did not factor in your economic circumstances and credit standing when considering the account application. When they approved it, he became the sole, rather than joint, owner of the account.

Now, at some point, your husband added you to the account as an authorized user. This designation gave you charging privileges while the credit card was active. In the event he was unable to pay his bill and the account went delinquent, his creditor would have been unable to turn to you and demand payment.

The only caveat to this protection would be if you lived in a community property state. In that case, assets and liabilities incurred during the course of the marriage may be seen as belonging to both spouses equally. And, as you mentioned, you do live in California, which is indeed a state with community property laws on the books. For this reason, I normally would have suggested you check your liability status with an attorney, pronto. But you've already done that! Your guy said you were in the clear before you got the form in the mail.

However, to make extra sure you won't have to pay that tax bill, I checked with a lawyer on your behalf. (Can't have too many attorneys weighing in, right?). According to Arica Bryant-Presinal, assistant managing attorney for the tax corporation Roni Deutch, located in North Highlands, Calif., you can officially relax.

"Since you were not a joint owner on the credit cards, then your attorney is right, you are not responsible for those debts," says Bryant-Presinal. "From your question, it sounds like your husband did not leave any assets and no estate was ever created. If that is the case, then the 1099-C addressed to your husband's estate can be ignored. As I understand it, you only recently received the 1099-C, roughly two years following your husband's passing. Since you will not file a joint tax return with your husband for 2010 (the year you received the 1099-C) then you do not need to claim the canceled debt as taxable income."

I hope all of this makes you feel more at ease. It's distressing to get tax and other paperwork now, but you need to put this matter behind you and move forward. Clearly, life is too short and precious to waste worrying.

See related: Stuck with husband's debt in community property state?

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Updated: 01-23-2018