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Dealing with a spouse’s debts after death

| Mar 30, 2018 | Estate Planning

Some spouses in Minnesota may wonder how their debts will impact others after they pass away. Debts can accumulate as a person reaches the end of life, especially if medical bills begin to escalate. However, it is important to understand the relationship between debt, marriage and death to help make clear decisions during the estate planning process.

When a person passes away, their existing debts are paid out of their estate, including the money and property that they leave behind. Spouses are not automatically responsible for the debts that their partners accumulate unless there are joint loans, joint credit cards or other jointly held debts. Personal debts, like those caused by individual student loans or credit cards, do not become the debts of one’s spouse upon marriage.

However, since spouses often inherit the largest portion of their partner’s estate, they will receive a smaller inheritance as a result of debts being paid first. There are state and federal laws that govern the priority order for bills paid out of the estate.

Typically, burial and funeral costs have the first priority, followed by the costs of estate administration and then taxes, medical bills and other debts. A final tax return must also be filed. Since non-probate transfer items like life insurance and similar policies are not part of the estate, they are not included in these calculations. In addition, a home that was owned through joint tenancy will automatically pass to the other joint tenant.

There can be a number of decisions and issues to keep in mind when planning for the future of one’s estate. An estate planning lawyer can draw up important documents like wills, trusts and powers of attorney when helping a client through the process.

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