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John Elder
John Elder, Estate & Elder Law
Category: Estate Law
Satisfied Customers: 4631
Experience:  Over 14 years experience in Medicaid, Estates, Trust.
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my contractor husband under a DBA in TX died leaving considerable

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my contractor husband under a DBA in TX died leaving considerable debt. Is my life insurance at risk?
Welcome! Thank you for your question.

What you need to know is that the life insurance is not at risk for payment of his debts. However, you need to know the answer for a broader question.

The broader question relates to whether your other assets must be used to py his debt.

The answer to what other property you own is subject to payment of the debt depends on what type of property you and your husband owned.

Separate property for purposes of this discussion shall mean that which is acquired by either spouse prior to marriage or by gift or by inheritance.

At the time of the death of a spouse, separate property is classified as either:

Separate property of the decedent – This property will always be liable for the debts of the deceased; or

Separate property of the surviving spouse – The separate property belonging to a surviving spouse is not normally subject to the debts of the deceased spouse unless liability is established by other rules of law.

Community property may be divided into three separate classifications as follows:

Deceased Spouse’s Special Community – This property is community property which was subject to the deceased spouse’s sole management and control is liable for debts incurred by the deceased spouse.

Surviving Spouse’s Special Community – This property is community property which was subject to the surviving spouse’s sole management and control. It is not liable for separate liabilities of the deceased spouse incurred before marriage or for non-tortious liability that the deceased spouse incurred during the marriage, unless both spouses have been made personally liable by particular acts. Those acts include liability incurred when the deceased spouse was acting as the agent of the surviving spouse or when the deceased spouse incurred a debt for “necessaries” as are described by statute. For example, a surviving spouse’s special community might be liable for debts incurred to care for or improve the community, but it probably will not be liable for the debt incurred for some type of personal use that provided no benefit to the community. These “necessaries” are more fully documented by statute.

Joint community property is that property which was under the joint management of both the decedent and the surviving spouse. This property will be subject to liability claim against the estate of the deceased spouse.

There are three specific constitutional and statutory protections which are further offered to a surviving spouse and are as follows:

The Texas Constitution continues to exempt the homestead from claims of Decedent’s creditors. The surviving spouse is given an exclusive right to occupy the homestead so long as he/she elects to do so, even if the homestead is the separate property of the deceased spouse.

Exempt personal property, including furnishings, automobiles and personal effects in an amount that does not exceed $60,000.00, may be protected from creditors of the deceased.

Family allowances may be granted in addition to the homestead and personal property exemptions. This allowance is paid out of the decedent’s property and may be established by the probate court for one year’s maintenance of the surviving spouse and, if applicable, minor children. This amount of a family allowance is set at the discretion of the probate court, but should not be allowed if the surviving spouse has a sufficient separate estate to pay those living expenses.

It should also be noted that careful notification of creditors pursuant to statute may reduce the overall debt burden by taking advantage of statutory shortening of statutes of limitations for creditors to act.

Obviously, when a spouse dies leaving a large number of debts, there can be serious consequences, but these concerns can be addressed, and many times the seriousness of the consequences can be avoided by working closely with an attorney of your choosing who is familiar with these subjects.

While the insurance may be exempt from payment of the debt. If you risk loosing substantial community property or separate property to pay the debt you may find that you have to pay the debt off even if the life insurance is protected.

I cannot provide you with legal advise. I have provided you with information about the law related to your question. My answer, and any information that you find online, should not take the place of having a consultation with a lawyer in your area to advise you regarding your specific issues.

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John Elder and 4 other Estate Law Specialists are ready to help you
Customer: replied 4 years ago.

Thank you. My attorney couldn't answer this question until he did more case law study related to statute changes several years ago.