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Your personal debt can pass to spouse when you die

The loss of a spouse often leads to a time of great difficulty. This challenge is greatly increased if your spouse had an accrued a large amount of debt. In community property states like Texas, this means there is a distinct possibility that you will assume that debt, or that your property will be vulnerable to his or her creditors. Typically speaking, the couple assumes the debt if they are married regardless of name on the account. 

What is community property?

Texas Family Code defines community property as anything a couple acquires or buys together while married. There are exceptions, including:

  • Inheritance or a gift that is structured to only be yours or theirs
  • Debt incurred for the purpose of personal pleasure
  • Retirement accounts are protected

Texas also has special community property. This is based on who has control of the property during marriage, there may be no community property designation if you were not aware of or involved in this property.

Keeping your home and estate

Texas’s homestead exception does protect your marital home regardless of value, so your deceased spouse’s creditors cannot take it as long as you choose to live there. This is the case even if the house was in their name. The state also allows you to keep up to $60,000 of personal property. There may also be an allowance from the estate for the first year that is also protected from creditors, but this will be determined during probate. Whether you receive this is based on the value of your separate property.

Strategies for addressing spouses debt

If you are aware of a spouse’s crippling personal debt, it is wise to encourage them to speak with an attorney who has experience handling bankruptcy rather than carry this debt for years. This can be particularly important if their health is less than robust or their potential for earning the money to repay the debt is unlikely. While they can be reluctant to address this issue on their own behalf, they may do it when they realize that their debt obligations will potentially transfer to you. Each case is different, so it always wise to speak with an attorney to get an accurate analysis of your circumstances.

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William T. Peckham
1104 Nueces Street, Suite 104
Austin, TX 78701
Phone: 512-487-7604
Fax: 512-478-1790
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