Will My Family Have to Pay Off My Credit Cards When I Die?

Almost 3 out of 4 consumers die in debt. Will your family members inherit your credit card debts?

Credit card debt won’t vanish when you pass away. Your estate will settle your debts using your assets, says Yahoo Finance’s recent article, “What Happens to Credit Card Debt When You Die?”

The executor of your estate will use your assets to pay off your credit cards. However, if your debts wipe out all your assets, your heirs may be left with little or no inheritance.

If you’re worried about your family being stuck with your debts after you die, know your rights and work with an estate planning attorney to help protect your assets.

When a family member dies, relatives typically won’t have to pay off his or her credit card debts. However, there are some exceptions. A spouse or other family member might have to pay debts, if he or she:

  • Co-signed for a loan or credit card;
  • Jointly owned property or a business;
  • Lives in a community property state (California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin); or
  • Is required by state law to pay a debt, like health care expenses, or to resolve the estate.

An authorized credit card user doesn’t have to pay off the deceased’s debts, unless one of the conditions listed above is applicable. If it’s a joint account, the surviving cardholder must keep making on-time payments to avoid late fees and negative credit reporting. If sorting out debts is causing stress, a family can check the deceased’s credit reports.

Unless you have a living trust or make other arrangements, a probate court will determine your financial affairs after you die. In most states, the executor named in the will is responsible for handling the final details of your estate.

When the deceased has credit card debt and assets, the big question is if the assets are available to the creditor. If the deceased had a life insurance policy, proceeds go to beneficiaries before any of the debts are repaid. If the deceased had assets, credit card debts and other debts, the executor must know that the beneficiaries can’t get money before the bills are paid.

The first debt the estate has to pay is secured debt, like a mortgage or car loan. The estate then usually pays administrative and legal fees, followed by unsecured debt, like credit cards. Creditors are required to submit their claims against the estate by a deadline determined by state law. If that claim meets the deadline, and the estate has sufficient assets, it must be paid. The rules vary by state, and arrangements made prior to death will impact the amount of debt that must be paid.

Ask an estate planning attorney about a living trust: assets held in a trust won’t be subject to probate. The trust will own the assets, and they’ll be distributed according to the trust. These laws vary by state, so speak with an estate planning attorney licensed to practice in your state.

Reference: Yahoo Finance (August 19, 2019) “What Happens to Credit Card Debt When You Die?”

Suggested Key Terms: Estate Planning Lawyer, Debts, Executor, Revocable Living Trust, Asset Protection, Probate Court, Inheritance, Financial Planning, Probate Attorney

About the author

Bob Brumfield

Attorney Bob Brumfield has been practicing law since 1984 and regularly receives the “Top Lawyers in California” award as well as the “Client Distinction” and “Client Champion” awards from Martindale-Hubbell.

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