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- How to Redeem a Roth IRA
- Can a QDRO Be Enforced on an IRA?
- What Happens to IRA Assets When a Person Dies?
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The death of a spouse can leave the surviving spouse with many tasks to accomplish, including the planning of a funeral or wake. The deceased spouse can also leave behind unpaid bills. When a spouse dies intestate, or without a will, various factors can determine who is responsible for payment of the debts.
When a spouse dies intestate, the estate of the spouse will often go through probate in court. Probate is a legal process where the assets of the deceased are distributed according to his will. If there isn't a will, the assets are distributed according to state law. At a probate hearing, the judge will appoint an administrator to oversee the payment of the deceased's debts. The administrator is often the surviving spouse. Debts, taxes and other claims are paid out of the deceased's assets first before distribution to heirs.
A joint debt is one where you and the deceased spouse both agreed to accept financial responsibility for the payment of the bill, such as a mortgage or joint credit card. If you and the deceased spouse are joint account holders, you are still responsible for the balance owed on that debt, even after the death of the deceased spouse. If the assets of the deceased spouse are insufficient to cover the debt, the surviving joint account holder will be responsible for making the debt payments.
In a community property state, such as California, both spouses are jointly responsible for the payment of debts incurred during the marriage, even if the debt was solely in the name of only one spouse. If a spouse dies the surviving spouse in a community property state may be held responsible for the deceased's debts regardless of whether there is a will. The creditors may pursue you for payment of those bills. If you fail to pay, the creditors could escalate the matter via a collection agency or legal action. In noncommunity property states, each spouse is generally responsible for the debts in his or her own name. If you're in doubt about what you might owe under your state's laws, consult an attorney.
Insolvency occurs when a person dies without owning any assets or has debts exceed her assets. If the deceased is insolvent and is the only person responsible for his debts, the administrator can inform the creditors of this insolvency. Because the deceased owns insufficient assets, there aren't any assets to use to pay his creditors after his death. The creditors will write the debt off as a loss. The administrator might be required to provide to the creditor proof of the deceased's death, such as a death certificate.