They say there is nothing certain in life but death and taxes. When you die, there are a lot of issues to deal with and many experts encourage people of all ages to take care of their business just in case something should happen. It makes things easier on those you leave behind. This is especially true with your credit card debts. Debt doesn’t go away just because you pass away.
So what happens when you die? Do your credit cards die with you?
All people’s financial situations are different so there is no one right answer to this question. Let’s consider the many factors involved in your credit card debt in the event of your death.
Are You An Individual Account Holder?
If the credit cards are in your name only, the debt is considered solely yours. This means that after your death, the balance remaining on your credit cards must be addressed through your estate. The executor of your estate has the responsibility if your estate goes through probate to check out your debts and assets according to the laws to make the determination of which bills get paid when. If you die with significant amounts of debts, including credit card debts, there stands the possibility that your heirs will not see any funds from your estate.
If you have enough funds in your estate to make good on balances owed to creditors, your debts will be paid through the estate. With the new regulations of the CARD Act, established in 2009, estate executors must receive notice of balances due immediately from all creditors. Effective February 2010, credit card companies are not permitted to add on any additional fees or payment penalties throughout the time period the estate is being settled.
What Happens If Your Estate Can’t Cover It?
If the assets you have in your estate are not enough money to cover all the debts you owe, it is the credit card companies that are likely to lose out. Your creditors will be notified by your estate administrators that your estate is insolvent, meaning there is not enough cash to foot the bills. The credit card companies can not legally require your heirs or other relatives pay of your debts.
Are You A Joint Account Holder?
In the event you share an account with your spouse, relative, or business partner, your debt will then become the responsibility of the other party completely or in cooperation with your estate. On authorized users on the account are not liable for the debts in the event your estate can not cover what is owed.
When Is Debt Inherited?
There are some situations where credit card debts become more complex. If you live in a community property state and are an individual account holder, it is still possible your spouse will end up responsible for paying your debts. The community property states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Laws in the these states all differ regarding community property laws concerning debts and death. You will need to consult with a financial expert experienced in the community property laws and how they work in a death situation.
How To Handle Accounts of Loved Ones
In the event of the death of a loved one and you are acting as the estate executor, you have the responsibility to contact their creditors and alert them of the death. Contact individual credit card companies and inquire as to their protocol for handling death situations. Typically, you will be required to send a certified copy of the death certificate of the account holder. You’ll also need to provide the card company with the name and account number of the deceased. Make copies of your documentation and send the letter with a request for delivery confirmation to verify your notification in a timely manner.
If a credit card company or collections agency begins to contact you regarding the deceased’s outstanding debts, you should immediately refer them to the executor of the estate who is handling the payment of other bills. If you continue to be hounded by collection attempts, it is essential that your verify these important things:
- Is the debt they are calling about valid and has the company provide proof?
- Are the debts being collected within the statute of limitation time table based on the state the debtor resided?
- Are there any factors involved that makes you liable for the debts of the deceased?
A collection agent and even some creditors will use many tactics to collect their money. They often scare unknowledgeable family members into paying off debts of a deceased loved one, debts they are not legally responsible for paying. If the calls do not cease, it may be in your best interest to consult an attorney experienced in these matters if you are the estate’s executor. Never be bullied into paying debts of another you do not have to pay. Credit card companies do need to face the fact there are some scenarios where they must write-off the balances due when an estate can not pay.