My inspiration for this blog follows the death of the mother of a close friend of my husbands’. Last week, my husband and I attended her funeral and about a week later, and right on schedule I might add, the questions started coming in. Questions about the estate, the bank accounts, insurance policies, the will and of course, the debts. Today’s question is always the same: Am I responsible for my wife’s, husband’s, mother’s, father’s, sister’s, brothers, etc. debts. Be sure and read to the end, because the answer is not always the same. Sometimes, yes. Sometimes, no. Sometimes, maybe. I will cover four (4) typical scenarios, but of course, it’s possible that there could be yet another answer if there is another set of facts and circumstances that I happen to not address.
1. No: The personal responsibility, of the surviving person, to pay a personal debt, of the decedent, is the same following death as it was in life. While creditors, and common mistaken knowledge, may lead you to believe otherwise, generally speaking, if you did not apply for, sign for, join in, co-sign or otherwise agree to be responsible for the debt, of your loved one, while they were alive, then you are not responsible for the payment of the debt following their death. And yes, the answer remains the same even if you are the beneficiary and receive payment from a life insurance policy or an heir or legatee that receives disbursement of estate assets!
2. Yes: Of course, this answer changes if you did apply for the debt, with the now deceased person, or joined in the debt later (while they were still alive), co-signed or otherwise agreed to be responsible, jointly, for the debt. In this case, then yes, following the death of your loved one, friend or other person, you will be responsible for the payment of the debt. Note that business debts, depending upon the business setup and documents, may have a different answer.
3. Yes: Now here is a subtle difference, if you have become the executor or personal representative of the estate and the estate has assets, then you, on behalf of the estate would be responsible for the payment of the debt, but only in your fiduciary capacity, and only by using assets of the estate, pursuant to Maryland Estates and Trusts Article, §7-401. Note: even then, however, you generally only pay the debts of those creditors who actually file a claim against the estate or who have a valid lien that would impair the liquidation of some valuable asset. Further note that if you personally pay for debts or expenses, including funeral costs, before the estate is opened and the estate has assets, you may be reimbursed.
4. Maybe: If the estate has no income, no bank accounts or no equity in any property, then the creditors can receive no payment because, well, as we’ve all heard: “You can’t get blood from a turnip!”. However, a common situation surrounds, the estate with no assets, except for the family home, which has a mortgage on it, no equity, yet the family wants to keep the home. Of course, in this scenario, someone would have to pay the mortgage and taxes to prevent the home from going to foreclosure or tax sale, while the family decides what they want to do. So how does the family transfer the home into the names of the remaining family member or members? That’s the subject for another blog!
However, in the meantime, follow these general guidelines and don’t personally pay debts you don’t have too! Of course, every situation may have additional facts and circumstances that may change these answers. If that is the case, be sure and consult an attorney should you have additional questions.