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Seek Advice Before Settling Your Late Spouse's Debts

A strong sense of security—be it emotional, mental, physical, or financial—is fundamental to a person’s well-being. This is especially true during times of grief, such as the loss of a spouse. But there are a number of financial circumstances that can make a widow feel uneasy in the wake of loss. If a new widow counted upon her spouse’s income, this by itself can be a new source of financial anxiety. Even worse, if her spouse leaves behind unresolved debts, a new widow might find herself in an even more vulnerable position.

In the case of unresolved debts, new widows need to know that there are many cases where they are not personally responsible for their spouse’s outstanding balances. Acting hastily can result in costly mistakes that could have otherwise been avoided.

Keep in mind, though, that there are many widows who choose to pay their husbands debts right away. Their reasons could include anything from honoring their husband’s commitments, readily available resources, a strong sense of ethics, or simply ease—to eliminate the burden from her financial life.

But for widows who either (1) weren’t aware of the outstanding debts accrued or (2) whose cash flow is not immediately positioned to handle paying them off, knowing your options is a great first step to taking care of this task.

Here’s what you need to know as a new widow before you settle your late spouse’s debts:

  • Usually, there is no legal obligation to pay a deceased person’s debts. There are certain exceptions, so it's best to check with a financial expert or an attorney beforehand.
  • On joint accounts, be it business or personal, the joint account holder is responsible for the debt.
  • A joint account holder is not the same as an authorized user. An authorized user is not liable.
  • Under some circumstances and in certain states, the surviving spouse may be required to settle their late spouse's debts using shared property. Community property also called community of property is a marital property regime found in some common law jurisdictions.

Consider an Estate Checking Account

Amid many difficulties, a new widow might wonder where to begin dealing with their spouse’s outstanding debts. After taking into account the aforementioned tips and consulting a financial expert or attorney to assess the particular situation, opening an estate checking account might be a good first move.

The main goal of an estate checking account is to be the means through which a deceased person's estate is settled. This type of account is usually opened by the individual's representative, in this case, the widow, under the late person's estate. An estate checking account then temporarily holds the late spouse's assets, so that a new widow can then settle unfinished affairs using only the money in the account.

Understanding How Your Credit Could Be Affected

What are the chances of a late spouse’s outstanding debts affecting a widow’s personal credit history? Unless the widow was a joint account holder, co-signed for the loan, account, or debt, or lived in a community property state, the creditor or debt collector should not report their spouse's obligations to any of the three credit bureaus under the widow’s name. If this occurs, this information should be directly disputed with the company after visiting annualcreditreport.com.

It's also worth noting that within a month after your husband’s death you should send a copy of their death certificate by mail (with return receipt) to each credit reporting bureau and ask that your spouse’s credit report get flagged as “Deceased: Do Not Issue Credit.” This is for cyber security and identity theft prevention purposes.

Before You Pay Anything, Seek Counsel

If you find yourself in this distressing situation, remember to seek advice before settling your late spouse's debts. It’s easy to hastily assume that just like everything else we shared with our spouses we share their debts too. However, this is oftentimes not the case and proper assessment can save you time, money, and more unnecessary grief.

Dealing with the financial and emotional aftermath of the loss of a spouse is one of the toughest parts of becoming a widow. It can often bring sadness, anger, pain, and grief that make financial decision-making even more difficult.

Fortunately, the process doesn’t have to be undertaken alone. Your financial advisor can do much of the heavy lifting to help settle your spouse’s estate. They can help with transferring assets, closing accounts, updating beneficiaries, and protecting you from scammers and identify thieves looking to take advantage of the newly widowed. Download our Survivor’s Loss of Spouse Checklist here to see what items you’ll need to tend to in the wake of your spouse’s loss.

But the financial side is just the start. As Certified Financial Transitionists (CeFT®s), we are specially trained in helping widows with the personal side of this life-changing transition, as well. Our goal is to help our widow clients-in-transition increase their well-being, facilitate better decision-making, and restore flow to their everyday lives. We have found—and psychology confirms—that people who experience flow during times of transition think more clearly, see stress as a temporary challenge rather than a debilitating condition, and make the best decisions for themselves and their future.

If you or a loved one have recently lost a spouse, we encourage you to reach out by booking an initial conversation. We have a host of resources to help you navigate these difficult times as well as a team of dedicated professionals ready to help you make sense of your new situation.

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