Loved ones aren’t usually responsible for paying a deceased family member’s bills and debts. By law, lenders aren’t supposed to pursue survivors for money. When the deceased leaves more debts than assets, creditors often don’t get paid. Depending on where you live, medical bills may be treated a little differently, but it’s usually only spouses who may find themselves liable, not other relatives.
The Deceased’s Estate
Payment of a deceased’s bills falls to his estate -- at least those debts that are in his name alone. When the estate is opened for probate, the executor tallies up all the property and cash the deceased owned at the time of his death. The executor then totals his debts and financial obligations, including medical bills. Ideally, the assets exceed the debts. The executor then uses the deceased’s property to pay his outstanding bills and the costs of operating the estate. His beneficiaries receive what’s left according to the terms of his will. If there’s not sufficient cash in the estate, the executor can liquidate or sell assets to raise money, but she may need court approval first.
If the deceased’s bills and debts exceed the value of his assets, his estate is said to be insolvent. Taxes and other debts owed to the government are typically paid first with the money that’s available, and unsecured creditors are last in line to receive payment. If the money doesn’t stretch that far, these debts aren’t paid, but beneficiaries don’t receive anything in this case, either. Some states make an exception for medical bills, however, because they’re incurred for necessary and unavoidable health care. These states hold a surviving spouse responsible for outstanding medical bills incurred during the marriage if the estate doesn’t have enough money to pay them. It's a practice known as the necessities doctrine or the doctrine of necessities. The ultimate decision as to whether certain expenses are "necessary" often falls to a court, but medical bills are usually included. To find out if your state observes a necessities doctrine, contact a local legal aid office.
Jointly Owned Property
If the deceased owned any property jointly with someone else -- either his spouse or another individual -- this usually isn’t included in his probate estate. It’s not available for liquidation for payment of the deceased’s bills because it transfers directly to the co-owner. If this happens in a state that doesn’t hold a surviving spouse responsible for medical bills, and if the estate doesn’t hold enough other assets to pay all the deceased’s debts, medical bills may go unpaid.
In some cases a health care provider will ask a spouse to sign a guarantee of payment. If the spouse signs such an agreement, she’s responsible for the medical bills if the estate doesn’t hold sufficient funds to pay them. The guarantee must be in writing and must usually be signed at the time of treatment, not months or years later and particularly not after the patient’s death.
Community Property States
Nine states treat marital property and debts as community property and this changes the usual rules as well. These states are Washington, Idaho, California, New Mexico, Arizona, Texas, Louisiana, Wisconsin and Nevada. If you live in any of these states, the law treats debts incurred during a marriage as legal obligations of both spouses, so you would be responsible for your spouse’s medical debt.