King & Wood, P.A.

Is Wife Responsible for Husband’s Debt after Death?

“Few know the complex federal and state laws governing outstanding debts from a deceased spouse. Some may fall victim to paying bills that they are not legally responsible for.”

The loss of a spouse is one of the most stressful events in life. It is hardly the time one is prepared to deal with the avalanche of bills and, in many cases, unpleasant financial surprises. A recent article from Forbes, “Managing Your Partner’s Debt After Loss: What Surviving Spouses Need To Know,” says that surviving spouses aren’t responsible for their deceased spouse’s debt unless they had joint credit cards or if any loans or property were jointly owned.

Any outstanding debts should be paid from the deceased spouse’s estate and not by the surviving spouse. The estate is simply the value of a person’s assets. In most cases, the decedent’s debts must be paid before any assets are distributed.

If the surviving spouse is the only heir, they receive whatever assets are left after debts are paid. They personally do not have to pay those debts. However, the deceased spouse’s debts will diminish their inheritance.

A worst-case scenario is when the estate doesn’t have enough money to pay for the debts, and the widow is left with nothing. In some states, it is possible to petition the court to reserve a portion of the money, known as the homestead exemption or allowance, to provide some financial support. This is usually done in cases where the spouse would otherwise be destitute.

An estate planning attorney can help determine how to settle the estate and manage debt to protect the surviving spouse. Understanding the different types of debt is needed to know what to do.

Credit card companies are aggressive about debt when someone dies. Collection agencies start calling shortly after the death, and even if the credit card is not in the surviving spouse’s name, they try to bully the grieving person into paying something. The estate planning attorney is better equipped to inform the credit card company, not the collection agency, of the person’s death, provide a death certificate and settle the debt with the estate. Having an attorney on your side is also helpful when negotiating how much of the debt should be paid.

Medical debt is a real problem for surviving spouses. Federal and state laws about medical debt and agencies focus on helping consumers. Healthcare providers will sometimes work out payment plans and reduce payments. A person struggling with grief may want to ask a family member or their attorney to help with negotiations.

Homes are usually the largest asset, carrying the biggest debt. If the ownership and mortgage are in both people’s names, it’s still due. The debt becomes an estate liability if the mortgage is solely in the deceased spouse’s name. The mortgage company can foreclose on the home if the estate can’t pay the debt. In most cases, couples have life insurance to protect them from losing their home. Your state may have laws to protect surviving spouses, which your estate planning attorney will know.

Considering the death of a beloved spouse is not easy. However, the unavoidable fact is that one spouse will die before the other. It would be a great kindness for both spouses to prepare for this eventuality. Having an estate plan created, including a will, sharing information about all debts as well as assets and working with an estate planning attorney to ensure that all the right elements are in place—trusts are funded, life insurance policies are paid, etc.—would allow the surviving spouse to grieve without the added stress of a tangled estate.

Reference: Forbes (Feb. 18, 2025) “Managing Your Partner’s Debt After Loss: What Surviving Spouses Need To Know”

Estate Planning Questions for Couples with a Big Age Gap

“For couples with an age difference of 10 years or more, assets need to last significantly longer to cover both of their retirements, making the risks of missteps higher.”

Even if it was never an issue in the past, when couples with a significant age gap reach their 60s and 70s, the age difference can present challenges. When one partner is ten or more years younger than the other, assets need to last longer, and the impact of poor planning or mistakes can be far more complex. The article in Barron’s “Big Age Gap With Your Spouse? What You Need to Know” explains several vital issues.

Examine healthcare coverage and income needs. Health insurance can become a significant issue, especially if one partner is old enough for Medicare and the other does not yet qualify. How will the couple ensure health insurance if the older partner retires and the younger depends on the older partner for healthcare? The younger partner must buy independent healthcare coverage, which can be a budget-buster.

Be strategic about Social Security. Experts advise having the older spouse delay taking Social Security benefits if they are the higher-income partner. If the older spouse passes, the younger spouse can get the bigger of the two Social Security benefits. Delaying benefits means the benefits will be higher.

Planning for RMDs—Required Minimum Distributions. Roth conversions may be a great option for couples with a significant age gap. Large traditional tax-deferred individual IRAs come with large RMDs. When one spouse dies, the surviving spouse is taxed as a single person, which means they’ll hit high tax brackets sooner. However, if the couple converted their IRAs to Roths, the surviving spouse could withdraw without taxes.

Estate planning becomes trickier with a significant age gap, especially if the spouses have been married before. Provisions in their estate plan need to be made for both the surviving spouse and children from prior marriages. An estate planning attorney should be consulted to discuss how trusts can protect the surviving spouse, so no one is disinherited. Beneficiary accounts also need to be checked for beneficiary designations.

Couples with a significant age gap need to address their own mortality. A younger partner who is financially dependent on an older partner needs to be involved in estate and finance planning, so they know what assets and debts exist. Life has a way of throwing curve balls, so both partners need to be prepared for incapacity and death.

Plans should be reviewed more often than for couples in the same generation. A lot can happen in six months, especially if one or both partners have health issues.

Reference: Barron’s (May 19, 2024) “Big Age Gap With Your Spouse? What You Need to Know.”

How to Help a Grieving Spouse Deal with the Social Security Administration

“There are things you learn from books and things you discover from life.”

Even those who regularly work with elderly people are surprised by the obstacles presented during the course of major life events, according to a recent article from Financial Advisor, “Working With Grieving Spouses And The Social Security Administration.”

For one such professional, the sudden loss of her grandfather meant her grandmother was without her spouse of many decades and living on her own for the first time in her life.

The author’s mother moved the grandmother into her own home and began dealing with the father’s estate and the various government agencies, including Medicare and Social Security. The Social Security Administration turned out to be more than the mother or financial professional expected.

The grandmother needed to file for Social Security survivor benefits. She had been collecting spousal benefits since age 62, and she was now 89.

Despite multiple calls and in-person visits to the local SSA office, the grandmother’s situation wasn’t resolved. Various staff members provided a great deal of inaccurate information. They even told the grandmother the funeral home had never informed the SSA of the grandfather’s passing, which was not true. There were many contradictory instructions issued, none of which made sense.

Spouses need to know what to do when their spouse dies, and they become the surviving spouse. These are admittedly grim facts to face, but as estate planning attorneys know, it is always better to be prepared before these events occur.

The surviving spouse must go to their local Social Security Administration’s office to file for Widow’s, Widower’s, or Surviving Divorced Spouse’s Benefits.

Making an appointment in advance is better than just arriving and hoping to be seen.  Appointments are not technically required, but you may risk having a long wait or having to come back if the office is busy.

The Social Security Administration has an “Express Check-In” for mobile phones to use upon arrival at the office.

There are certain documents needed for this appointment. Bring everything—if you don’t have the original, a copy will do—so you don’t need a return visit because of a missing document.

Check the IRS website for their list of what information is needed when filling a claim for surviving spouse benefits and have all the answers to the questions prepared in writing.

Bring a blank check and a recent bank statement to provide your bank routing and account numbers, so monthly deposits can be made directly into the accounts.

Remember SSA representatives are not estate planning lawyers or financial advisors. They may be trying their best, but you may receive inaccurate or contradictory information. If you are not sure of the information, reach out to your estate planning attorney.

This is an extremely emotional time for the person who has just lost a loved one. If possible, have someone with you who can advocate for you if the process becomes overwhelming.

Reference: Financial Advisor (Nov. 6, 2023) “Working With Grieving Spouses And The Social Security Administration”

Everyone Needs an Estate Plan

“Life is unpredictable. At least some uncertainties and concerns can be addressed with a good estate plan that offers a wide range of benefits intended to protect one’s well-being and family’s wealth.”

A comprehensive estate plan offers many benefits, from protecting surviving spouses, ensuring one’s wishes for medical care are followed, or reducing estate taxes. While the primary focus of an estate plan is different for every individual, reports the article “A good estate plan important” from The Record-Courier, there are common benefits for everyone concerned.

A good estate plan protects individuals and families before death by protecting assets for the use of an incapacitated person by placing them in a trust managed by a responsible trustee. An estate plan allows you to designate an agent to make health and financial decisions during incapacity. It will enable you to develop a retirement strategy by assessing and organizing your assets and financial needs.

With an estate plan in place, a deceased person’s family is spared the burden of making difficult decisions, including when or if to withhold life support treatment or how to handle a loved one’s remains. These decisions can be made in advance through the estate plan, so the family knows their loved one’s wishes, making a difficult time a little less stressful.

Clearly and transparently expressing goals and wishes for the final distribution of one’s estate removes the emotions and potential conflict associated all too often with the division of money and other assets, including personal effects.

An organized and funded estate plan ensures that the family is protected. If the right steps are taken, there will be enough money to pay bills and other living expenses, financial affairs will be organized, and accounts will be accessible to loved ones immediately without waiting for probate and the court’s permission. Guardians for minor children are appointed, and uncertainty needs not make their grief and trauma worse. Special needs children and adults are protected with a trust to supplement their needs in addition to government benefits, and the education of young adults is planned for with a college fund.

A comprehensive estate plan prepared in tandem with a business succession plan is crucial for business owners. Without a succession plan and estate plan, the business can fall apart after the departure or demise of the business owners. An estate plan can provide the rules and instructions for the business to transition to a new owner and ensure continuity.

A good estate plan also addresses tax planning. There are more than a few tax reduction strategies to minimize the taxes on a decedent’s estate, making more money available to the surviving family.

For philanthropically minded people, the estate planning process can also support charitable causes, creating a legacy and inspiring other family members to think beyond their own needs and wants to serve their communities.

It’s never too early to begin preparing an estate plan—life is unpredictable, and there’s no downside to being ready for whatever may come next.

Reference: The Record-Courier (Aug. 27, 2023) “A good estate plan important”

Will You Receive a Social Security Award Letter?

“There are different types of Social Security benefits available, and the type of letter you get will depend on your application.”

A Social Security award letter is an official document notifying recipients that their application for Social Security benefits has been approved, and payments will be sent, explains the article “What Is a Social Security Award Letter?” from U.S. News & World Report. There’s another type of document, a benefit verification letter, which includes more details about benefits and can be used as proof of income from Social Security.

The award letter confirms you’ll begin to receive benefits, lays out the next steps you need to take to receive benefits, and can be used if there’s any question about your eligibility. This document is essential, so keep it secure with other related paperwork.

The Social Security Administration issues these letters once their application for benefits has been approved. They show the information about your qualifications, prove you’re entitled to benefits, and help guide you in making the right choices to get benefits.

The first step is to apply for benefits, which you may do by filling out an online application on the Social Security website, calling a local office to speak with a representative, or going to the local Social Security office in person.

If you are not awarded benefits for some reason, you may be able to appeal the decision.

Once benefits are being sent, you may receive a benefits verification letter, also known as a benefits letter, a budget letter, a proof of income letter, or a proof of award letter.

You may need these documents to apply for housing, a loan, or other financial transactions.

There are different types of people who receive Social Security awards letters. Retirees who have worked and paid into the system are eligible once they meet the criteria, including enough work credits. Retirees may apply for benefits as early as 62 and as late as 70. If you sign up for benefits before your full retirement age, you might see reduced benefits for a temporary period.

Those who have worked and paid into the system and become disabled may receive disability benefits. These benefits are to help cover the loss of income and may help support the family of a disabled individual.

Surviving spouses and dependents of eligible workers may receive survivor benefits. These are designed to support family members, especially young children when a working person dies.

Typically benefits arrive within 30 to 90 days after the award letter is received.

Reference: U.S. News & World Report (Aug. 14, 2023) “What Is a Social Security Award Letter?”

Can You Make Heirs Behave from the Grave?

“There are many stories of strange conditions in wills and trusts over time. For example, the German poet Heinrich ‘Henry’ Heine died in 1856 and left his estate to his wife, Matilda, on the condition that she remarry, so that ‘there will be at least one man to regret my death’.”

Imposing strange or amusing conditions upon heirs may make for good novels. However, in the real world, terms and conditions are limited by the law. A last will or trust contains language specifying how you want assets to be distributed after your death. There are some conditions and terms included, but others should be left for fiction authors, according to a recent article titled “What Can You Force Your Heirs to Do To Get Your Wealth” from Forbes.

If something is illegal or against public policy, it is not acceptable in a last will. Defining public policy is not as easy as whether something is illegal, but it can be described effectively enough, or clarified by your estate planning lawyer. For example, making a gift of land to the town on the condition that an offensive statue be placed in the middle of the land would be against public policy. Requiring an individual to not marry a specific person or type of person before they can inherit is considered illegal in a last will. Beneficiaries are not to be prevented to live their lives freely through the force of a last will.

Whether a condition is valid also depends upon whether it is a precedent that existed at the date of your death or a condition that occurs after your death. For instance, a requirement for a beneficiary to live in a specific location at the time of your death might be considered valid by a court. However, a condition requiring a spouse to never remarry would not be valid.

Blatantly illegal terms of an inheritance are easy terminated. Leaving money to a known terrorist organization or requiring an heir to commit a crime is an easy no-go. However, sometimes things get murky. Restraints on getting married or selling or transferring property are two of the biggest problems, and often the stories behind the last wills are sad ones.

A condition of not marrying, divorcing, or remarrying is not legal. However, a condition that the beneficiary does not marry outside of the faith has been enforced as a valid last will condition. A complete prohibition of a second marriage by a surviving spouse has been deemed void. It should be noted that certain requests have been permitted, like having a surviving spouse lose payments from a trust when they remarry. As antiquated as it may sound, courts have affirmed the concept of the specific limitation to provide financial support only until the surviving spouse remarries and is, therefore, not void.

A probate court will not void a condition on a bequest automatically, even if it is clearly illegal. The beneficiary, or another interested party, must file with the probate court to have the condition voided. If you fail to do so, when the last will or trust is allowed, it is possible to lose your right to void the condition.

A better way to go: don’t try to control your heir’s behavior from the grave. It creates terrible ill will and may cloud a lifetime of happy memories. If you don’t want to give something to someone, your estate planning attorney will help you create an estate plan, and possibly a trust, to control how your assets are distributed.

Reference: Forbes July 21, 2021 “What Can You Force Your Heirs to Do To Get Your Wealth”

What Happens to Social Security Payments after a Person Dies?

“The Social Security Administration should be notified as soon as possible after a beneficiary dies. Depending on your relationship to the deceased, you may be entitled to benefits for survivors.”

How does the federal government know to stop sending Social Security payments when a recipient has died? What if the surviving spouse or a dependent doesn’t know they are entitled to benefits after a loved one has died?

Tackling this issue when an older person or spouse has died can be complicated, but a helpful article from CNBC titled “Here’s what happens to Social Security payments when you die” provides important answers.

The Social Security Administration needs to be notified of the death of a benefit recipient as soon as possible. In some cases, funeral homes have a notification process, and they report the death. The person who has been named as the deceased’s executor can also call Social Security.

Whoever calls or contacts the Social Security Administration will need to know the decedent’s Social Security number.

The last month a person is eligible for Social Security benefits is the month prior to their death. Any benefit paid after the month of their death must be refunded. That’s because each payment received represents the previous month’s benefits. If a person dies in August—even if they die on August 31—July is the last month they were eligible for benefits.

If benefits are made by direct deposit, the bank needs to be notified, so it can return the benefit. Using those funds after a recipient has died is a federal crime, even if the death is not reported. If the SSA receives notice of this occurring, the agency may initiate a criminal investigation. The SSA and other government agencies coordinate their records to identify any unreported deaths.

Anyone already receiving money based on the deceased’s record will automatically convert to survivor benefits, once the SSA receives notice of the death. However, in other cases, the surviving spouse should contact SSA to apply for survivors’ benefits. This must be done by appointment in person at a local office, since it cannot be done online.

If the surviving spouse has reached full retirement age, they can get their deceased spouse’s full benefit. They can apply for reduced benefits as early as age 60 or age 50, if they are disabled. If the survivor qualifies for Social Security on their own earnings record, they can switch to their own benefit anytime between ages 62 and 70, if the benefit amount would be greater.

There is usually a one-time lump-sum death payment of $255 given to a surviving spouse or qualified child.

Reference: CNBC (Aug. 16, 2021) “Here’s what happens to Social Security payments when you die”

 

What Is the Primary Purpose of a Credit Shelter Trust?

“A credit shelter trust is used to help married couples with significant assets pass their estates after their deaths to children or other beneficiaries without incurring estate taxes.”

Credit shelter trusts are an estate planning tool for protecting assets from creditors, moving assets out of the estate to avoid probate and adding another layer of protection to a deceased spouse’s wishes. Only married couples can use credit shelter trusts, according to a recent article explaining it all: “How Does a Credit Shelter Trust Work?” from Yahoo! Finance.

The main reason to use a credit shelter trust is to minimize federal estate taxes on assets in the estate. Also known as “wealth transfer taxes,” the federal estate tax has been around since 1916. Estate tax rates are very high. Wealth more than $1 million over the exemption rate is taxed at 40%. While today’s federal estate tax exemption is very high—$11.7 million for individuals and $23.4 million for couples—it is generally understood that these numbers are not likely to remain at these historic levels. The current estate tax exemption expires in 2025, unless Congress acts to reduce it earlier.

Estate tax law changes often both at the federal and the state level, so estate planning attorneys continually track these changes to protect their clients.

The credit shelter trust, also known as a bypass trust, B trust, exemption trust or a family trust, is an irrevocable trust. As with all trusts, it is a contract between the trustor—the person who creates and funds the trust—and the trustee—the person in charge of the trust. The trust may contain any type of property, from cash, stocks, bonds and real estate to collectibles and artwork.

The credit shelter trust becomes effective upon the death of one of the spouses. Assets in the trust are not included in the estate of the surviving spouse. Depending upon the terms of the trust, these assets may pass to beneficiaries after the first spouse passes without incurring any tax liabilities. Alternatively, as long as the surviving spouse lives, they may receive income from assets in the trust.

The credit shelter trust also protects the wishes of the decedent spouse. The trust document can be used to direct that some or all of the assets of the first spouse to die shall pass to the children of a first marriage or other specific beneficiaries.

Credit shelter trusts are one of many tools that can be used for estate planning. They have the added benefit of protecting assets from creditors and maintaining the family’s privacy, since assets in trust do not go through probate. Your estate planning attorney will know which kind of trust is best for your unique situation.

Reference: Yahoo! Finance (Aug. 16, 2021) “How Does a Credit Shelter Trust Work?”

Do a Married Couple without Children Need a Will?

“In fact, many couples with no children mistakenly believe that they are less likely to need a last will and testament than couples with children.”

While estate planning for couples with no children seems like it would be very simple, the opposite is almost always the case, according to this informative article titled “Three keys to estate planning for couples without children” from The News-Enterprise.

If there’s no last will, intestate succession laws dictate who will receive property.

There are three relatively simple ways for couples to be sure their wishes will be followed, and property distributed as they want.

A secondary level of beneficiaries. Couples don’t always die at the same time, although it does happen. For the most part, upon one spouse’s death, assets owned together, including Payable on Death, or POD accounts, remain in the possession of the surviving spouse. If all of the assets are owned jointly, the surviving spouse may be able to avoid probate altogether. However, they should check with an estate planning attorney to be sure their state will accept this.

There should be provisions in the last will, in case of a simultaneous death. This lets the more important provisions focus on the beneficiaries. While property may pass easily outside of probate to the survivor, the same will not be true if property is to pass to beneficiaries. The estate will go through probate.

If at all possible, couples should have the same designated beneficiaries. If the couple intends to leave everything to the surviving spouse, they will need to decide who will receive joint property after both have died.

Last wills for each spouse must be created to work together. Designating separate lists of beneficiaries in each spouse’s last will and testament ultimately results in the marital property being left only to one spouse’s loved ones. The result: the other spouse’s family can end up being disinherited.

One way to address this is to create marital shares of property. Couples generally divide marital property in equal shares, although couples in blended families may choose to use a different fractional share.

For each fractional share, each spouse should write out their own list of beneficiaries, being sure that the total ends up being 100%.

Another point to be determined: will survivors within the group receive a larger share pro rata, or will children of the deceased beneficiaries receive their shares? This needs to be clarified when the estate plan is created to avoid potential problems for beneficiaries.

Beneficiaries could potentially be changed after the death of the first spouse, so if the couple wants to prevent anyone from being disinherited, they can use a revocable living trust. This can lock up the deceased spouse’s shares in a manner to allow the property to remain available for the survivor, but the survivor cannot change beneficiaries for the deceased spouse’s share.

Estate planning for couples with no children can have its own pitfalls, so consult with an experienced estate planning attorney, who will know how to protect all members of the family.

Reference: The News-Enterprise (July 27, 2021) “Three keys to estate planning for couples without children”

Estate Planning for Couples with Big Age Differences

“Increasingly, financial advisors are working with clients from nontraditional families, which can sometimes require different or additional strategies to protect their assets and achieve their financial goals.”

Seniors who are married to younger spouses have a special situation for estate planning, a situation that’s become more common, according to Barron’s recent article “Couples with Big Age Gaps Require Special Attention.”

This kind of family requires planning for the older spouse’s retirement needs and healthcare costs, while determining how much of the older spouse’s wealth should go to the children from any previous marriages while balancing the needs of a future child with a younger spouse. Beneficiaries for all financial accounts, last wills and all estate documents need to be updated to include the new spouse and child. The same goes for medical directives and power of attorney forms.

Social Security and retirement account considerations differ as well. The younger spouse may begin receiving their own Social Security at age 62, or a portion of the older spouse’s Social Security, whichever is greater. If the older spouse can wait to file for Social Security benefits at age 70, the younger spouse will receive more spousal benefits than if the older spouse claims earlier. Social Security pays the survivor’s benefit, typically based upon the older spouse’s earnings.

Pension plans need to be reviewed for a younger spouse. If the pension plan allows a survivor benefit, the surviving spouse will receive benefits in the future. IRAs have different beneficiary distribution rules for couples with significant age differences. Instead of relying on the standard Uniform Lifetime Tables, the IRS lets individuals use the Joint Life and Last Survivor Expectancy Table, if the sole beneficiary is a spouse who is more than ten years younger. This allows for smaller than normally Required Minimum Distributions from the IRA, allowing the account a longer lifetime.

Families that include children with special needs also benefit from trusts, as assets in the trust are not included in eligibility for government benefits. Many families with such family members are advised to use an ABLE Savings Account, which lets the assets grow tax free, also without impacting benefit eligibility. There are limits on the accounts, so funds exceeding the ABLE account limits may be added to special needs trusts, or SNTs.

A trustee, who may be a family member or a professional, uses the SNT assets to pay for the care of the individual with special needs after the donor parents have passed. The child is able to maintain their eligibility.

For same sex couples, revocable or irrevocable trusts may be used, if the couple is not married. Nontraditional families of any kind with children require individual estate plans to protect them,  which usually involves trusts.

Trusts are also useful when there are children from different marriages. They can protect the children from the first marriage and subsequent marriages. A wisely constructed estate plan can do more than prevent legal battles among children—they can preserve family harmony in the non-traditional family after parents have passed.

Reference: Barron’s (July 27, 2021) “Couples with Big Age Gaps Require Special Attention”