When my spouse dies, will the creditors demand payment from me??

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To many times we hear of a married couple having credit cards or loans that the other spouse does not know about.  You know, your kid needs some extra money, you dont want to have to explaine it to your spouse...ah, just use the credit card. Or, you spouse is having a birthday and you really want to get him a new sail for the boat but money is tight...ah, just use the credit card.  You see where Im going with this. 

So, does this impact the surviving spouse?

Well, it depends on whether the survivor is legally considered a co-borrower for this credit card debt.  

Lets look at two issues, whether debts survive death and whether a debt is considered joint debt.

First, if someone dies, responsibility does not automatically fall to the survivors.  In Canada, debts cannot be inherited and cannot be transferred upon the death of a spouse. 

It is also important to know that no-one is legally responsible for their spouse's debts just because they are married.  You become liable if you co-signed the loan or guaranteed payment.  Legally this is know an joint debt.  It becomes more complicated for credit cards if a supplemenatary credit card is involved.  If you had a supplementary credit card with your spuse, which is common, you will need to review the terms and conditions of the credit card agreement.  Some credit card companies hold the secondary cardholder only liable for charges they incurred.  Others consider the entire balance to be "joint and several" (both parities 100% liable)

If the credit cards were in your spouses name alone and you did not sign any agreement or guarantee and you are not a supplementary cardholder, then the credit card companies cannot persue you for payment.  These debits will, however, be a debt of your spouses estate and will be paid before any funds are transferred to the estate beneficiaries via the will. 

If you were a co-borrower on these debts, and the estate does nothave enough assets to repay the debts, then the lender will look to you for payment. If you cannot pay, you may need to talk with a Licensed Insolvency Trustee about the debt relief options. 

This scenario illustrates the importance of seniors talking openly about their finances.  This problem could have been handled much easier if known much earlier.  A death often takes the matter out of the hands of those involved. 

Information from Scott Terrio, Manager, Consumer Insolvency at Hoyes Michalos & Associates Inc., Licensed Insolvency Trustees at Hoyes.com.  Thank you Scott. 

For more information, we would be happy to talk to you.

Michele Wells Financial Advisor Manulife Securities Incorporated 

Focused WealthCare Balancing Finances & Lifestyle

call (807) 684-1900 fax (807) 626-5111 e-mail Michele.Wells@manulifesecurities.ca

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This is for information purposes only. Thank you