Medical debt is an issue that makes national headlines as surprise bills from emergency rooms overwhelm even those who thought they had good insurance coverage. It is natural to worry about a long-term illness and the effect it could have on your family’s financial well-being. Every family’s financial situation is unique and will need to consider factors such as how much and what kind of medical debt has accumulated, your income and assets, any other debts owed, and your will and estate plans.
Most states follow a common law system of property ownership where assets in one person’s name belong to that person separately. There are nine states who use a community property system where assets and debts acquired during marriage are considered to belong to both partners. While New Jersey is a common law state, it also considers medical debt as a joint spousal liability.
Whether getting a divorce will relieve a spouse of medical debt may depend on who signed the paperwork with the facility that treated the patient. If the medical condition leads to the patient’s death, then their will and estate come into consideration. The estate will be responsible for paying the debt of the deceased. When estate assets are insufficient to cover all claims in full, New Jersey law stipulates the order in which debts are to be repaid as follows:
- Reasonable funeral expenses
- Costs and expenses of administration
- Debts for the reasonable value of services rendered by the Office of the Public Guardian for Elderly Adults
- Debts and taxes with preference under federal or state laws
- Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending them
- Judgements entered against the decedent, according to the priorities of their entries respectively
- All other claims
Out of this list of debts, medical expenses are number five, leaving the possibility that in cases where estate assets are insufficient, they may not be repaid at all. If you have a life insurance policy for which your spouse is the beneficiary, that would not be considered part of the estate. A death benefit is solely the property of the beneficiary.
Divorcing solely for the purpose of avoiding medical debt could potentially raise the issue of fraud as more people initiate Medicaid divorces to qualify for affordable health care. If you and your spouse continue to live happily together after divorcing on paper, the state could investigate to see if your divorce is real. For this type of advance planning, couples should consult with a qualified family law attorney.
Bridgewater Divorce Lawyers at Lyons & Associates, P.C. Provide Compassionate Counsel for Those Going Through a Divorce
If you are considering a divorce, consult with a skilled Bridgewater divorce lawyer at Lyons & Associates, P.C. Our experienced team can assist you with any family law matter. Call us at 908-575-9777 or contact us online to schedule a free consultation. From our offices in Somerville and Morristown, New Jersey, we represent clients throughout Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.