Debt: One of the Joys of Marriage
California is a state that follows community property laws. Generally any property (or debt) acquired during the marriage, is owned by both spouses. However, there are a tremendous number of nuances to the community property laws that can completely relieve one spouse of the other’s debts upon death. Consult with an estate attorney for a debt review; you could save thousands of dollars with the right kind of legal help.
General credit card debt is considered joint property. Because it’s assumed to have benefited both spouses, incurred debts are likely to pass from one spouse to the other when one dies — even if the account was in the deceased’s name.
Business debts are not commonly passed to the surviving spouse as long as the business is operating under its own federal identification number. If the deceased was operating a sole proprietorship, the surviving spouse might inherit the business’s debts, however a good lawyer could help him or her avoid that liability.
Federally funded student loan money is usually cancelled upon the death of the borrower. However, private student loans operate under entirely different standards. A good estate attorney would need to review the loan documents and determine if there is a way to avoid transferring the debt.
An estate attorney can help prevent debt from move from one spouse to another through a series of legal tools such as post-nuptial agreements, trusts, and business incorporations. In addition, a good attorney can help you establish inexpensive life insurance policies that are tied to outstanding debts to ensure the surviving spouse isn’t left with a huge liability.