Can a wife turn down an inheritance from her husband if he owed more than he owned?

Recently a reader told me that her husband had passed away, and asked whether she could turn down her inheritance from him if he owed more than he owned. Is it possible for a beneficiary to turn down an inheritance? Sure. But in this situation, more questions than answers come to mind for me, so I thought I'd take this opportunity to explore what a person in this situation might want to take into consideration.

A general rule of estate law and procedure is that debts are paid first and beneficiaries only inherit if there is enough left in the estate after debts are paid. Therefore it wouldn't really help if the wife turned down her inheritance, since there wouldn't even be an inheritance if there were unsatisfied debts."Inheritance" only refers to assets that pass under the will, or on the laws of intestacy if there is no will.

This made me think that perhaps the wife wasn't really talking about inheritance. Perhaps she was actually referring to assets that passed to her because of her husband's death, but not through his estate. This would be assets that passed to her because she and her husband owned them jointly (such as a bank account or their home), or because she was the named beneficiary (such as on a life insurance policy, pension, or RRSP).

This is where the wife might want to make sure that she has personalized legal advice tailored to her situation. She needs to understand how debt, titles and taxes work in her specific situation. Let's look at a few possible scenarios. One is a joint bank account between the husband and the wife. When the husband died, the account automatically belonged to the wife. It doesn't form part of his estate and is not available to creditors.If he owed money on a credit card, she would not have to use the joint account to pay it. Similarly, a life insurance policy that named the wife would be paid straight to her no matter how much debt was owed by the husband's estate, as the policy doesn't form part of the estate.

The question asked by this reader also makes me wonder whether the wife is worried that by accepting assets, she is also assuming responsibility for his debts. Unfortunately it's commonly - and wrongly - believed that a wife takes on a husband's debts when he dies, and vice versa. That simply isn't true.

This is not to say that some assets don't come with debts attached, because they do. Some debts are secured, meaning that if the debt isn't repaid, the asset can be repossessed or other legal action can be taken. If this were the case, say for the husband's car loan, the wife could allow the creditor to repossess the car and she would owe nothing herself.

Life insured debts also factor in. Many mortgages, for example, are insured so that when either the husband or wife dies, the insurance money covers the mortgage and the surviving spouse then owns the house outright.

I would strongly urge anyone who is faced with a situation like this to sit down with a lawyer for an hour and talk it all through. This is a complicated web of several laws and rules, and nobody should expect to figure it out on their own. Under absolutely no circumstances should you listen to friends who tell you what happened to them or someone they know. The facts are different. Their case doesn't apply even if you think it's similar.