Who Is Liable For Your Credit Card Debt After Death?
Of course not many people visualize their death. However, if you have a credit card debt, or you are thinking of applying for a new card, it is wise to think about what will happen to that debt when you are no longer alive. In some cases, the debt can follow to your grave, or it can come to haunt your loved ones after your death.
Credit card debt for joint accounts
If you and your spouse have a joint account, the responsibility of repaying the debt will fall on your spouse once you pass away. Nevertheless, if the account is not a joint account, then your spouse will not be liable for the debt.
Credit card debt for authorized signers
Authorized signers are not responsible for the credit card debt. Your estate will pay off the credit card debt after death and the creditors close the account, they will no longer be able to use those cards.
The estate will pay your credit card debt after death
If you leave a credit card debt when you pass away, and the account was not jointly owned, then the outstanding debt is yours alone. In that case, your estate is accountable for the debt.
The estate is equivalent to the value of your property at the time of death. If you write a will and appoint someone as the executor, they will be responsible for paying any outstanding debts or bills. However, they will not be personally responsible to pay the debt. Meaning, the credit card company cannot go after them if the estate isn’t solvent enough to pay off the debt.
Also, the executor will notify the creditor about your death. If you do not leave a will, the laws of the state that you reside in will determine how your property will be distributed to pay your debts.
If the value of your property won’t cover your debts
If your estate’s value is not high enough to cover outstanding debts, then your debts get prioritized and your assets liquidated.
Leaving property to your family in a will? Doesn’t mean that they will get it. If the courts decide the assets must be sold your family has the choice to either
- Pay the creditor
- Let the creditor have the asset
This is all depending on the state you live in.
Unfortunately, your beneficiaries will not get a penny. But on the upside, there won’t be any personal liability to your family. Since the estate is insolvent, the credit card companies will get as much as they can from the estate, close the account and write off the balance.
Community Property States
When we bring into the picture community property estates, debt inheritance becomes more complicated. Still, your estate is responsible for paying off your debts after death. Also, jointly held property in some states can be considered for liquidation when evaluating the estate of the deceased. So creditors may force your family to sell a part or even the whole house to settle the outstanding debt.
Joint property can include the assets you accumulate during your marriage. In some situations, the debt that occurs during the marriage can count as joint property as well. So if you have a separate credit card, the debt may pass to your spouse after your demise.
Community property laws apply in the following states: Washington, Wisconsin, Texas, New Mexico, Nevada, Louisiana, Idaho, California, and Arizona.
As for your assets, some of them will not undergo probate. Items such as 401(k)s, IRAs, insurance, and brokerage accounts will go the person who you will name as your beneficiary.
