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Credit Card Debt at Death: Can Someone Else Be Responsible?

Estate planning is, in part, about making inheritance designations for assets left over after a passing. Of course, hand-in-hand with assets are debts. Understanding those potential debts at death, and making plans for the payment of all liabilities, is also factored into comprehensive estate plans dealing with long-term financial preparations.

This work is important for many reasons, not least of which is avoiding potential surprises where another is held personally responsible for debt accrued by the one who passed away. In general,
upon one’s passing, all of their debts are paid off first, with the remaining assets divvied out according to the wishes listed in planning documents. If one’s debts are larger than assets, those creditors may be forced to take a loss. Surviving family members are generally not liable for the unpaid debts
However, estate planning attorneys often warn community members of certain arrangements where creditors may actually go after relatives for unpaid debt.

For example, consider one of the most common forms of consumer debt–credit cards. A CNBC story recently discussed a few situations where survivors may face the unwelcome surprise of being hounded by creditors for debt accrued by a relative who died.

The most obvious situation where this might occur is if one is a joint cardholder. It is not uncommon for adult children to co-sign a credit card with an elderly parent. This is often done so the child can keep an eye on expenses. But it should not be forgotten that this may leave the child open to the debt–even if the parent is the one who made the purchases. Importantly,
there are differences between an “authorized user” and one who actually co-signs on the card. Authorized users are generally not liable for the debt upon death, and so if you worked with a relative to obtain a credit card, it is crucial to understand the exact liability you may or may not face down the road.

Another common situation where debt goes to another unexpectedly upon death involves divorce. Many divorce settlements require one spouse to pay off joint credit card debt. But what happens if that spouse dies before that debt is paid off? Even though the marital assets were split with the deceased ex-spouse’s payment of the debt off-set, the credit card company may still go after the surviving ex-spouse for payment.

Losing a relative is hard enough. But that loss is manifestly more challenging when various financial issues are thrown into the mix–including surprise liability for debt. Making matters worse, it is not unheard of for credit card companies to go after surviving family members, even when those family members are not obligated to pay. It can be quite intimidating to deal with
aggressive companies, particularly on complex debt liability issues.

To avoid those unwanted shocks and ensure outside creditors do not try to take more than what they are entitled, consider getting in touch with the San Diego estate planning lawyer at the Law Office of Scott C. Soady.

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