Situation
Minchella & Associates worked with a client whose spouse had passed away. The living spouse was not involved in the family’s finances and was responsible for their home. Upon further investigation, we discovered that the deceased spouse had many outstanding personal expenses, including credit card debt and medical expenses. The living spouse felt overwhelmed and needed to decide if they would maintain the home or move to a new property.
Challenge
Managing an estate following a spousal death is challenging in an already sensitive time. It is important to analyze the deceased spouse’s outstanding personal expenses to determine if the living spouse would be financially liable.
It is also important to remember that creditors can see each purchase made to their own account. If the expense falls under the purview of the Family Expense Doctrine, creditors can pursue the surviving spouse even though they did not make the purchase or have the medical treatment. Life Insurance paid to the living spouse, pension payments, and social security are exempt from creditor claims but there may be other assets available for payment of the deceased spouse’s obligations.
One way to determine if the Family Expense Doctrine applies to a purchase is to consider the item. If the purchase was for a family vacation, the doctrine applies. If the purchase was for a personal item, like a briefcase, the doctrine does not apply. However, generally creditors must file their claim within two years for non-probated cases, up to six months for probated cases after which the debt is, by law, uncollectable.
Solution
Minchella & Associates investigated this client’s expenses, analyzing each line item to determine the best result for the surviving spouse. While it would have been easier to recommend that the living spouse quickly sell the estate and move to a new property, the team reviewed all expenses, identifying which payments were outstanding, and which items were exempt as part of the Family Expense Doctrine.
Outcome
If there are numerous challenges, or when the real estate challenge is too big to shoulder alone, we are here to serve. We go the extra mile for our clients, and we were able to minimize the debt that the living spouse was responsible for, allowing the spouse to keep their family’s property.
