Estate Planning: Will My Spouse Automatically Inherit My Debt in North Carolina?

If you are worried about debt, you are certainly not alone. Many American families have concerns about debt. According to the most recent Credit Card Survey from WalletHub, we owe a collective $1 trillion in credit card debt alone. A key part of the estate planning process is preparing your finances. For many people, this means thinking about debt.

This raises an important question: Am I liable for my spouse’s debt if he or she passes away? The answer is “it depends”—you are generally only responsible for jointly held debt, no separate debt. Though, there is an important exception. In this article, our Charlotte estate planning lawyers explain the most important things you should know about spousal debt in North Carolina.

Whether or not you are legally responsible for your spouse’s debt depends on the nature of the financial obligations. To simplify the matter, spousal debt falls into one of the following three broad categories:

• Jointly Held Debt or Co-Signed Debt (Yes—You are Liable): You are legally responsible for jointly held debt. As a simple example, imagine that you have a joint credit card with your spouse. When he or she passes away, approximately $5,000 is still owed on the account. You are legally liable for that debt. The reason is that it is a joint debt and joint debts do not disappear when one party dies. Similarly, if you co-signed a personal loan taken out by your spouse, you are responsible for that debt.
• Separate Debt (No—You are Not Liable): As a general rule, separate debt is not inherited by any other party, including by a spouse. For example, imagine that your husband had a store credit card with Home Depot, Lowe’s, or another major hardware store. The account was solely in his name. If he owes $7,500 on the store credit card when he passes away, you (as a spouse) are not personally liable for that debt. It is a separate debt. That being said, in this situation, the creditor can make a claim against the estate of the deceased. However, if all your assets are jointly held with your spouse (marital assets), they are not subject to the probate process and there may be no assets for the creditor to claim.
• Secured Debt (The Debt is Tied to Property): Finally, it is important to emphasize that secured debt is always tied to the underlying property. For instance, imagine that your spouse had a vehicle solely in his or her name. The vehicle has a $5,000 outstanding auto loan. If you take possession of the vehicle, you are also responsible for that loan. The debt is attached to the property. If the property in question is worth far less than the debt attached to it, you could simply decline to take possession of it and let the lender sort it out.

To summarize, a spouse is liable for jointly held debts, including any financial obligations to which they are a co-signer. A spouse is not liable for the separate debts of their partner. However, the creditor can make a claim against the estate of the deceased spouse. Whether there is anything to “claim” depends on the specific circumstances.

There is a limited exception to North Carolina’s general rules on spousal debt. Under North Carolina law (NC General Statutes § 131E-91), the state follows a long-standing legal principle called the ‘Doctrine of Necessities’. A spouse can sometimes be held financially liable for the medical, hospital, and/or nursing home costs incurred by their partner immediately prior to their passing. These cases are complicated. A well-structured estate plan should be prepared for all possible consideration. If you have any questions about North Carolina’s Doctrine of Necessities, a Charlotte, NC estate planning lawyer will protect your rights.

At Arnold & Smith, PLLC, our Charlotte estate planning lawyers are focused on solving problems for clients. If you have any specific questions about spousal debt and your estate plan, we are more than happy to help. Contact us now for a fully confidential initial review and evaluation of your case. With legal offices in Charlotte, Monroe, and Mooresville, we are committed to providing reliable estate planning services throughout the entire region, including in Mecklenburg, Gaston, Union, Anson, Stanly, Carabus, Lincoln, Rowan, and Montgomery counties.