Probate, Estate Planning and Trust Law
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Debt allocation after death

Many in Woodland Hills may joke about dying penniless and poor, yet in the case of many local residents, their financial circumstances may actually be worse than that. Recently, statistics seem to show that more and more people are dying in debt. Information shared by Fox Business shows that as many as 73 percent of Americans carry debt at the time of their deaths. The average amounts carried by those who do die in debt is just under $62,000.

It may be well understood by most that when someone dies, any claims against his or her estate are typically paid from its remaining assets. However, what if one were survived by a spouse? Along with the estate’s assets, would he or she also inherit the decedent’s debts?

The California Probate Code states that a surviving spouse (along with a personal representative, as well as any interested party to an estate, for that matter) may petition the court to allocate any debts payable either in whole or in part by him or her or the decedent. Debt allocation following debt occurs much the same way as it would during divorce proceedings, with the court designating debts as either separate or community. Separate debts will then be allocated to each spouse’s separate assets, with the same happening for community debts.

If the value of either side’s separate assets are insufficient to cover the total amount of his or her allocated separate debts, the unsettled amount shall then be allocated that spouse’s one-half share of all community assets, and then to the other spouse’s share if the debt is still not settled. The same process occurs with community debts, only in reverse order. 

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