20 Aug Must I pay my deceased husband’s loan?

Q. I’m 67 years old. My husband passed away suddenly in July, leaving me as the executor of his will. Last year he took a $35,500 loan in his name to buy an RV. I can’t drive it. Am I responsible to pay the loan, or can I surrender the RV to the bank? He only left me a small life insurance policy – which I need to pay for the funeral and ongoing expenses – and his retirement fund.
— Widow

A. We’re sorry to hear about your husband.

Whether or not a deceased spouse’s debt becomes the responsibility of the surviving spouse depends on several factors.

There is generally spousal liability for debts incurred by the non-debtor spouse only for necessary goods and services such as medical expenses, said Catherine Romania, an estate planning attorney with with Witman Stadtmauer in Florham Park.

“An RV would not fall in such a classification,” Romania said. “Your options now, however, depend on the contracts executed by your late husband and negotiations you should be having with the lender.”

Romania said any assets which are in the name of decedent – such as the vehicle – or pay into the deceased spouse’s estate would have to be liquidated and used to pay creditors in the order of priority set forth in the New Jersey statute.

The statute requires the funeral director to be paid before any other creditor, followed in order of priority by the other costs of administering the estate such as Surrogate and attorney fees, the office of the public guardian for elderly adults, taxes, medical expenses, judgments and finally all other claims, she said.

“Life insurance and retirement funds paid to a beneficiary directly, and not paid to the estate of the decedent, do not have to be used to pay the decedent’s debts and expenses unless the beneficiary is required to pay the debt as a result of being a spouse obligated to pay for necessaries, a co-signer or obligor or for similar reasons,” Romania said. “Then if the estate becomes insolvent, such that there is insufficient funds to pay all outstanding claims, claims within the same priority level must be paid pro rata.”

We recommend you speak with an experienced estate planning attorney about all the specifics of your situation.

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