How to Avoid Mistakes with Debt After Death

0:00When someone dies, do their deaths die too? Today, I unpack the truth about dead after death when you go walk away, when you can't, and why the order in which you pay them matters more than you think. We'll cover medical bills, student loans, credit cards, community property states, and the laws that decide who gets paid first. If these bills feel confusing or overwhelming, this episode will show you what really matters. Welcome to the Death Readiness Podcast. This is not your dad's estate clinic podcast. I'm Jill Mastriani, former state attorney, current realist, and your guide through Will's Trusts, ProBate, and the conversations no one wants to have. If your Google search history includes, do I need a trust? What exactly is ProBate? And am I supposed to do something with Mom's Will? You're in the right place.

1:00When I was practicing law in Nashville, I represented a woman who was administering her father's estate. I was doing what I always did, sending notices to creditors so we could start the clock on the statutable limitations. I asked her to make a list of all the bills she'd received so I could send those notices out. Weeks passed and she didn't send anything. I followed up, but still she didn't send anything. Finally, I asked if I could stop by her house on my way home from work. Just check in. The moment I walked in, I understood why I never received that list of bills. There was a towering stack of unopened mail on an armchair in the living room. She didn't even know where to begin. She told me she couldn't open the envelopes because she was afraid of what she would find. She was afraid she wouldn't have enough to pay the bills. The unknown had completely paralyzed her. So I sat next to her on the couch and we opened the mail together.

2:01I told her our first step was simple. We were just going to send notices to the creditors. That was it. One step. Nothing more. And then I told her that once a week I would stop by on my way home from work and we would open her dad's mail together. We would figure it out together. Because when we're grieving, we're scared. Even the smallest task can feel impossible. Not because we're incapable, but because the meaning of everything has changed. Understanding moments like this is what eventually led me to create the death readiness playbook. So your loved ones don't have to feel that lost and alone in the paperwork. It helps you document what you have, what you don't, and what bills you pay. So you can leave behind answers instead of questions. Check it out at deathreadiness.com slash playbook. That's deathreadiness.com slash playbook. Today's question comes from Tracy in Virginia.

3:02She asked, do we have to pay our loved ones credit card bills after their death? The answer is sometimes yes, sometimes no. We'll get to the specific Virginia law in a moment. But first, let's zoom out and talk about the general rule that applies in most states. You as the survivor of a deceased loved one, even if you're the surviving spouse, are generally not personally responsible for their debts. And when I say personally responsible, I mean that you are not on the hook with your own money. That does not mean that the estate of the deceased individual isn't responsible. Just means that creditors can't automatically come after you personally. There are however four important exceptions to the general rule that you are not personally responsible for a deceased loved one's debts. If any of these exceptions applies, you can be personally liable.

4:02Exception number one, you are a co-signer with the deceitant. If you co-signed alone, you are just as legally responsible as the person who died. The debt doesn't disappear. It simply becomes yours. Now, I am going to get to an exception to this exception in a little bit, and it has to do with student loans. But for now, let's continue with the remaining three exceptions. Exception number two, you are a joint credit card account holder with the deceitant. A joint account holder is a co-owner of the account. That means the credit card company can come after the joint owner for the full balance, even if every charge was made by the person who died. Being a joint owner is different than being an authorized user. An authorized user is someone who has permission to use the credit card, but who is not a party to the contract. They can make charges, but are not legally responsible for repayment.

5:05Exception number three, you are a surviving spouse, and your state law requires you to pay certain debts. In some states, there is a legal doctrine called the Doctrine of Necessaries. These laws can make a surviving spouse legally responsible for certain essential expenses incurred by their deceased partner. A necessary usually includes things like medical care and hospital bills, basic living expenses like food, shelter, and clothing, and funeral and burial costs. The idea behind these laws is that spouses have a legal duty to support one another. So if one spouse incurs essential expenses and then dies, the creditor may try to collect the remaining balance from the surviving spouse. The Doctrine of Necessaries doesn't apply the same way in every state, so the outcome can vary widely depending on where you live. And here's something that might surprise you. A pre-nuptial agreement does not override the doctrine of necessaries.

6:09Why? Because the hospital doctor or care facility was not a party to that contract, to that pre-nuptial agreement. You can't point to your pre-nupt and say, we agreed we wouldn't be responsible for each other's debts and expect the hospital to accept that. The hospital didn't sign your pre-nuptial agreement, so it's not bound by it. The fourth situation where you may be personally responsible for a deceased spouse's debts is if you live in a community property state. In these states, most debts incurred during the marriage are considered debts of the couple, not just the individual who incurred them. So if your spouse dies and the debt was created while you were married, you may still be responsible for it, even if the account was only in their name. So how do you know if this applies to you? There are nine community property states listed alphabetically. There are Arizona, California, Idaho, Louisiana, Nevada, New Mexico,

7:16Texas, Washington, and Wisconsin. If you live in one of these states, community property, meaning property acquired during the marriage, may be used to pay your spouse's debts. The exact rules vary from state to state and they can be complicated. If your spouse has died and you live in one of these states, it's important to speak with appropriate attorneys so you understand exactly what you are and are not responsible for. Now let's talk about one specific type of debt that comes up all the time. Student loan debt. If you have federal student loans through the U.S. Department of Education, the good news is that they are discharged at death. According to the federal student aid office, if your loan surfacer receives acceptable documentation of your death, such as a death certificate, your federal student loans will be forgiven.

8:18But what about private student loans? Private student loans are more complicated. What happens after a borrower dies depends on the specific loan agreement and the lender's policies. Some private loans are discharged at death. Others are not. There is no single law that governs all private student loans. If there is a surviving co-signer, that person will often still be liable, so it's critical to read the fine print. But there is a very important exception to that general rule. In 2018, Congress passed the Economic Growth Regulatory Relief and Consumer Protection Act, which amended the Truth and Lending Act. This amendment releases co-signers from their obligation when the student borrower dies. But this protection does not apply to all private loans. It only applies to private student loan agreements entered into on or after November 20, 2018.

9:23The law was enacted on May 24, 2018, and the statute specifies that the protections apply 180 days later, which is November 20, 2018. So if the loan was signed before November 20, 2018, the old rules apply. If it was signed on or after that date, the co-signer may be legally released. Now, let's bring this back to Tracy's question and to Virginia law. What are these specific rules in Virginia? In Virginia, one of the key statutes is Virginia Code Section 6.2-611, titled Liability of Surviving Party for debts and other liabilities of Decedence Estate. This statute deals with something called a multiple-party account. Under Virginia law, a multiple-party account means either a joint account or a payable on death POD account. A joint account is defined as an account payable on request to one or more parties.

10:32A POD account is an account payable to one person during their lifetime and at their death to one or more named beneficiaries. Multiple-party accounts matter because Virginia law says that if the assets in the probate estate are insufficient to pay the estate's debts, including certain statutory allowances, then the portion of a multiple-party account that belonged to the antecedent immediately before death can be pulled back to pay those obligations. In other words, even though joint and POD accounts otherwise avoid probate, in cases where the debts of the estate and statutory allowances exceed the value of the probate assets, they can still be reached to pay estate debts. So what counts as a debt of the estate? This could include things like credit card balances, medical bills, unpaid taxes, court costs, and attorneys fees. The term statutory allowances might be new to you. So what are statutory

11:41allowances? These are amounts that Virginia law sets aside for a surviving spouse and minor children before most creditors get paid. Virginia has three statutory allowances. The family allowance, the exempt property allowance, and the homestead allowance. The family allowance is money paid from the estate to support the surviving spouse and minor children. It can be up to $30,000 as a lump sum or up to $2,500 per month for one year. This is in addition to anything left to the spouse under the will. The exempt property allowance allows the surviving spouse or the minor children if there is no spouse, to claim up to $25,000 in household furniture, vehicles furnishings, appliances, and other personal effects. This can be taken in addition to the family allowance and anything left under the will.

12:43And lastly, the homestead allowance gives the surviving spouse or the minor children if there is no spouse, $25,000 of the estate. It is in addition to the family and exempt property allowances, but it replaces whatever the will left to the spouse, unless the will left them less than $25,000. The reality is that sometimes there simply isn't enough money in an estate to pay everyone that's owed. When that happens, state law decides what to pay first. Every state has a legal order of priority that controls which expenses must be paid before others. In Virginia, that order is found in Virginia code section 64.2-528. Here's how it works under Virginia law. Costs and expenses of administration get paid first. These are the reasonable and necessary expenses to collect, manage,

13:44and distribute the estate. That could include attorneys fees for probate, inventories, accountings, and creditor issues, executor or personal representative fees, insurance on estate property, and utilities for estate real estate. In other words, these are the cost of keeping the estate going in the assets protected long enough to pay debts and make distributions to beneficiaries. Next, statutory allowances get paid. These are the family allowance, exempt property allowance, and homestead allowance that we just talked about. These statutory allowances are protected by law and get paid before distributions are made to creditors of the estate. After paying the statutory allowances, Virginia gives priority to the first $5,000 of funeral expenses. Anything above that gets pushed down into the general pool of claims, meaning it may or may not get paid at all,

14:44depending on how much money is left over. Next, debts and taxes with preference under federal law get paid. These can include things like federal income tax liability for the decedence year of death as well as prior year income tax balances. Next up are medical and hospital expenses of the last illness, but it's capped at $4,000 per hospital or nursing home. If the decedence still had remaining debts from previous illnesses or medical events, those would be part of the lower priority general pool of claims. In total, Virginia has nine separate priority categories before you ever reach the final catch all category of all other claims. If you're serving as an executor or personal representative, you cannot just start paying bills, even if they seem valid. Because if you pay a lower priority claim first and the estate later runs out of money,

15:45you can be personally liable for that overpayment. So how do you even know which claims are valid? Many states impose a hard deadline for creditors to file claims with the probate court. Virginia uses a looser system. The clock keeps running until the personal representative takes certain actions or until the normal statute of limitations for the debt expires. For example, and Virginia, creditors under a written contract like credit card agreements have five years to make a claim, unless the estate takes steps to shorten that window. The law is about who gets paid, who must pay, and in what order vary by state and can be quite technical. So if you are administering in a state, my strong recommendation is this, do not pay any bills. Yes, even credit cards without first checking with your attorney. When someone you love dies, the paperwork can feel endless.

16:45The envelopes keep coming and the phone keeps ringing. Reef is layered with the fear of being taken advantage of or making a mistake you can undo. If there's one thing I want you to take away from today, it's this. You are not supposed to know how to do this already. The system is complicated. You are allowed to slow down to ask questions and to refuse to pay anything until you understand your rights. Debt after death is not just about money. It's about power, pressure, and timing. It's about who gets paid first and who may not get paid at all. And the wrong step, even with the best intentions, can cost you personally. Where the decedent lived matters because state law shapes everything. So make sure you're relying on guidance from your specific state, not just general advice. And if you want to deeper, steady your roadmap, I created the death readiness playbook to help you organize, understand, and take the next right step. Get your copy at deathreadiness.com

17:52slash playbook. That's deathreadiness.com slash playbook. Thank you for joining me for this conversation today. This is deathreadiness. Real, messy, and yours to own. I'm Jill Masteryani, and I'm here to help you sort through it, especially when you don't know where to start. Hi, I'm April Jill's daughter. Thanks for listening to the deathreadiness podcast. While my mom isn't a Chinese, she's not your attorney. The deathreadiness podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance, tailor to your unique situation, consult a license attorney in North State. To learn more about the services my mom offers, visit deathreadiness.com.