Allocating a Decedent's Joint Debts Secured by Jointly-Owned Property

One of the tasks that needs to be completed in the process of administering a decedent's estate is to determine what debts the decedent owed and arrange for payment of those debts. Sometimes, decedents may be joint obligors on a debt with another person, in which case the estate may be liable for a portion of the debt.

Under common law, even if the decedent was jointly obligated on a debt that was secured by property owned in joint tenancy, the estate still had an obligation to pay a share of the debt even though the underlying property passed in its entirety to the surviving joint tenant. The majority rule permits contribution by the estate to the surviving joint tenant, while the minority rule does not; however, the trend does seem to be towards the minority rule. In 1998, the Supreme Court of Rhode Island in Mellor v. O'Connor, 712 A.2d 375 (R.I., 1998), settled the issue in that state by rejecting the majority rule, holding that the surviving joint tenant was not entitled to contribution from the estate of the decedent for payment of a jointly executed promissory note secured by a mortgage on the property. For a critique of this decision, see this analysis by Patrick A. Randolph, Jr., then a professor at UMKC School of Law.

Section 2-607 of the Uniform Probate Code provides that a "specific devise [under a will] passes subject to any mortgage interest existing at the date of death, without right of exoneration, regardless of a general directive in the will to pay debts." In other words, if a decedent's will leaves a property to a beneficiary, and the property is subject to a debt, the beneficiary is not entitled to contribution from the estate for payment of the debt.

In 2012, the Supreme Court of Montana in In re Estate of Afrank, 291 P.3d 576 (Mont. 2012), held that a debt encumbering property held in joint tenancy is not exonerated upon the death of one of the joint tenants, meaning that the surviving joint tenant is not entitled to contribution from the estate for a share of the encumbrance. While the property did not pass via will, the Court looked to Montana's Uniform Probate Code and applied the policy of nonexoneration to the case at hand.

This issue has not been decided in Utah, where presumably the majority rule under common law would prevail:

In a majority of jurisdictions the courts have taken the view, at least in the absence of evidence of other intention or special circumstances, that a surviving spouse is entitled to equitable contribution out of the estate of a deceased spouse, in reimbursement of the payment by the survivor of more than his equitable share of their joint obligation, even though the debt is secured by real property which was held by them as tenants by the entirety, and which, therefore, is wholly acquired by the surviving spouse as surviving tenant, leaving the estate of the deceased spouse with no interest therein. 76 A.L.R.2d 1004

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