Are Michigan Joint Accounts Free From Creditor Claims Upon Death?

I recently met with a client whose husband passed away while owing substantial credit card and student loan debts. At the time of her husband’s death, my client and her husband had a moderate amount of cash and securities, all of which were held jointly. In Michigan, joint ownership of these types of assets by a husband and wife creates a tenancy by the entireties. The simple question my client had for me was this, “Am I responsible for paying the separate debts of my husband with this property?”

Michigan law provides that creditors of one spouse cannot reach assets that are owned by both spouses as tenants by the entireties. But what happens upon death? Are assets owned by a husband and wife as tenants by the entireties subject to a creditor who has a claim against only the deceased spouse? In Michigan, the simple answer is no, the surviving spouse is not required to use these assets to pay the debts of the deceased spouse and the deceased spouse’s creditors cannot reach these assets.

However, what if the joint owners are not husband and wife and the property is owned as joint tenants with rights of survivorship instead of as tenants by the entireties? Does this make a difference upon the death of one of the joint owners? In Michigan, once again the simple answer is no.

MCL §700.6101 provides that a joint owner who receives property after the death of the other joint owner receives that property free of the decedent’s general creditors. Of course this situation does not apply in the case of assets which are encumbered, such as a home subject to a mortgage or a car that is subject to a lien. In such cases, the surviving joint owner takes the joint property subject to the mortgage or lien against the property.

Certainly there is nothing that prohibits the surviving joint owner from using joint assets to pay the debts of the deceased joint owner if he or she wishes ….. but there is no requirement for them to do so. And in the case of my client who had some assets but was certainly not of substantial means, she was very relieved to learn that the joint assets she and her husband had accumulated could be used for future living expenses and the support of their children instead of being taken by her husband’s individual creditors.