My husband and I keep all of our accounts, loans, and credit cards separate except for our heating utility company. This is a second marriage for both of us. While I have established a very good credit history, my current husband has bad credit. Will I be responsible for paying off his debts if he passes first? I have never used his credit cards and my name is not on any accounts of his. Our cars are also only listed in his name or mine
We should all be prepared for our own deaths and those near to us. It’s smart to ask these questions while corrective action can still be taken.
The first way that you can find yourself responsible for another person’s credit card debt is if you agree to be responsible for debts incurred on the card. You’ll need to sign an application for this to happen. Generally you’ll be the owner/co-owner of the account or have co-signed on the account. But, you’ll know if you’ve obligated yourself this way (unless you didn’t bother to read what you were signing). In Nancy’s case, it appears that she hasn’t done that.
The second way that you could be responsible for credit card debts is less obvious. Suppose that Nancy is not personally responsible for the card. Only her husband is. So if her husband should die, the credit card company must look to his assets for payment. What does he own? Anything that’s titled in his name is fair game for creditors. So if her husband is not on the title to Nancy’s car, the car should be safe from his creditors.
It gets tricky with joint accounts. In some joint accounts you only own your portion of the account (i.e. half of an account with two joint owners). But in most, it’s assumed that either party owns all of the account. In other words, either Nancy or her husband could write a check for the entire balance of a joint checking account. In this case the credit card company would say that her husband owned all of the checking account and claim the entire balance to pay off the credit card bill.
Nancy has been wise to avoid joint accounts. She’s gone a long way to avoiding debts that aren’t her debts. But she’ll need to clear one more hurdle.
There are state laws that must be considered. For instance, your state may have a law that says that it’s assumed that half the property acquired during a marriage belongs to each partner. Therefore, half of your property (including savings accounts, etc.) is available to pay your spouse’s debts. You must research your state laws to find all possible dangers. A lawyer may be necessary in some situations.
Whether Nancy needs to talk with one will depend on her circumstances. She can do the basic things herself (and for the most part she already has). Keep separate credit card accounts. Don’t co-sign or guarantee any loans. Keep your assets separate.
If there are significant assets, it might be wise to see a lawyer. If you come in with specific questions and facts, it shouldn’t be too expensive to find out if you have any exposure to debts that you didn’t create.
Generally, you don’t become responsible for someone’s debts because you’re related to them, but there are exceptions and they can be expensive! So now’s the time to find out!
This is a guest post from Gary Foreman who is the editor of The Dollar Stretcher.com website – a site dedicated to “Living Better…for Less”. Not only will you find a special section on Baby Boomer Financial Issues, but you’ll also find articles like Anniversary Party Ideas.