Despite being a community property state, Texans are not liable for deceased spouses’ debts
Much confusion exists surrounding whether people are personally liable for a spouse’s debts after that spouse passes away. Some media stories, for example, often give the impression that creditors can come after a surviving spouse for a deceased spouse’s debts, as was recently reported by CNNMoney. This issue is especially confusing in Texas, which is a community property state, meaning that property bought during a marriage is considered to be held by both spouses. However, a closer look at the issue shows that while spouses may be impacted by a deceased spouse’s debts, they are not ultimately personally liable for them. The issue is an important one to understand when coming up with an estate plan.
Community property and community debt
As the CNNMoney article points out, Texas is one of just nine community property states in the nation. Usually, the term community property means that whatever both spouses acquire during a marriage is treated as being owned by both the husband and wife, including debt.
The problem, however, is that while Texas is a community property state, it is not a community debt state. According to the Texas Bar Journal, there is a lot of confusion surrounding the distinction between community property and community debt in Texas. Simply put, so long as the surviving spouse was not a cosigner on a debt, then he or she will not be held personally liable for the debts of the deceased spouse.
Estate still held liable
However, just because a surviving spouse is not liable for a deceased spouse’s debt does not mean that those debts go away altogether. Debts are still owed even after a person passes away, which means that creditors can still seek payment for those debts from the deceased person’s estate.
For spouses, understanding that an estate is still liable for debts could have a big financial impact. Surviving spouses that are expecting a certain amount from their deceased spouse’s estate should be prepared for the consequences of creditors seeking to settle debts by coming after an estate. Similarly, other surviving relatives, such as children of the deceased, should also keep in mind that a deceased person’s debts will likely still have to be paid for through the estate.
Estate planning issues
As the above article shows, many unforeseen circumstances can come up when dealing with an inheritance. As such, it is important to plan ahead to make sure that loved ones are properly taken care of after a family member’s death.
Estate planning is something that everybody should take seriously, although, unfortunately, very few people are willing to broach this taboo topic with their family members. Anybody who is looking to make sure that their loved ones are provided for should contact an estate planning lawyer today. With the proper legal counsel, people concerned about an estate planning issue will have the advice they need in order to make informed decisions.