Could You Be Liable for Unpaid Medical Bills of Your Deceased Spouse, Parent or Other Family Member?

Unpaid medical bills along with other debts of a decedent are generally paid from the person's estate. All the individual's assets pass to the estate upon death and debts are settled using assets in the estate. As pointed out by Brett Weiss, Maryland Bankruptcy Attorney, on the Bankruptcy Law Network, this is the case even if no probate proceeding is filed.

If you are named executor or personal representative of the estate, you are not personally liable for debts of the estate. They are settled using estate assets. If there are insufficient assets in the estate to settle all the debts, the debts remain unpaid and the creditor would generally have to write them off.

An exception is if you signed an agreement to guarantee payment of the medical bills or to be jointly responsible for them. As recommended in an article on the Bills.com website, in this case you should consult with an attorney in your state and show the attorney all the papers you signed related to your family member's medical treatment to determine the extent of your liability.

Another exception is if you live in a community property state. These states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In a community property state, debts incurred during marriage are generally considered community debts and the surviving spouse may be responsible, as indicated in the California Estate Planning Blog. You should consult an attorney to find out the specific rules in your particular state.

As recommended by Gerri Detweiler on Credit.com, if you find you are legally responsible for the debt, you may be able to negotiate with the creditor. If the creditor agrees to accept a lower payment, you should get that in writing to avoid any future misunderstandings. If a portion of the debt is forgiven, you could be subject to federal income tax on the canceled debt. And your credit could be affected if you are a co-signer or are jointly responsible for the debt. According to Detweiler, your credit should not be affected if you are legally responsible only because you live in a community property state.

If your family member was receiving medical treatment and care under Medicaid, the state must attempt to recover payment for the cost of the benefits from the person's estate. As explained on Elder Law Answers, no recovery can take place as long as the Medicaid beneficiary's spouse is living, or as long as there is a child of the beneficiary who is under age 21 or is blind or disabled.

States are required to seek recovery from the Medicaid recipient's probate estate but have the option to seek recovery from assets that pass outside probate. This may include jointly held assets, assets in a living trust, or a life estate. According to Elder Law Answers, the lien placed on a Medicaid recipient's home should only be to recover the costs of medical care if the home is sold during the beneficiary's lifetime. This lien should be removed upon the beneficiary's death. Elder Law Answers advises consulting with an elder law specialist to see how this rule is applied by your local Medicaid agency.

Sources:

Am I legally responsible for my deceased spouse's medical bills? Bills.com

Brett Weiss, Maryland Bankruptcy Attorney, Who Pays Bills When Someone Dies? Bankruptcy Law Network

Gerri Detweiler, Could You Be Responsible for the Debts of a Deceased Relative? Credit.com

Medicaid Rules, Elder Law Answers