After I die, will my wife have to pay my medical debt?


Q. After I die, can my outstanding medical creditors can go after payment from my life insurance death benefit? My wife is my beneficiary, and I want to protect these funds from creditors.
— Planning

A. We’re glad you’re planning ahead, and there’s a lot to consider here.

Most states use the “common law” system of property ownership, said Michael Green, a certified financial planner with Wechter Feldman Wealth Management in Parsippany.

In these states, he said, it is easy to tell which spouse owns what. For example, if John’s name is the only one on a deed or registration document, it is considered separate property and belongs solely to John.

However, if you live in one of the nine “community property” states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin – the law typically considers any assets acquired during marriage to be the property of both spouses, Green said. This means that what you earn, save and spend in the marriage is irrevocably tied to the other person, and it includes debts incurred during marriage as well. When you live in a community property state, all debts incurred by one spouse are considered debts of the couple, he said.

While it may sound like you can easily avoid this “joint spousal liability” by living outside a community property state, that’s not the case, Green said. The one exception to the rule is medical debt.

“Even in some common law states, you may still be responsible for medical debt incurred by your spouse,” he said. “Whether or not medical debt will become a joint spousal liability depends on the state in which the debt was incurred, and its laws regarding community property.”

New Jersey is one of the common law states that considers medical debt a joint spousal liability, regardless of which spouse incurred the debt, Green said.

Generally speaking, the assets in the estate of a deceased person must go through probate—a legal process that takes place after someone dies. This will include proving in court that a deceased person’s will is valid, identifying the deceased person’s property, having the property appraised, paying debts and taxes and distributing property as the will directs. If there is no will, state law will determine how property is distributed, he said.

“As far as the funds that your wife will receive, there is potentially good news. Life insurance proceeds are not considered part of your estate,” he said. “The death benefit goes directly to the beneficiary and becomes solely their property.”

This means that your wife can do what she chooses with the money and would not be subject to creditors of your estate claiming a portion for themselves. Green said.

Keep in mind that if you live in one of the nine community property states, or even a common law state that considers medical debt a joint spousal liability—like New Jersey—then your unpaid medical debt is also your wife’s responsibility both before and after your death, he said.

“Although she will not be required to use the death benefit to pay off the debt, it may be in her best interest to do so,” he said. “Leaving medical debt unpaid will have serious, long-term negative implications on her credit.”

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This story was originally published on April 17, 2019. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.