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What Happens to My Credit Cards After I Die?

There are a number of small questions you might have about to estate planning. For instance, what happens to your credit cards after you die? Does your estate have to pay the bill? Or can the credit card issuer go after your wife or children to collect the unpaid balance?

Credit Card Issuers Must Prove Debt

Death does not automatically terminate a credit card agreement. If the account was solely in the deceased person’s name, the credit card issuer may file a claim for the unpaid balance with the estate. If the account was jointly held with a spouse or another individual, that person may still be liable for the debt. Otherwise, a credit card company cannot pursue relatives for the debt.

After a probate estate is opened and a personal representative (or administrator) is appointed by the court, that person is responsible for paying any valid debts of the decedent, including credit cards. The personal representative may choose to pay these bills unprompted. Otherwise, the credit card company must file a claim with the personal representative within a specified time limits, which is usually four months in California.

The personal representative is not required to pay any claim made after this time limit expires. The personal representative also has the right to demand proof of the claim, i.e. itemized statements proving how much the decedent owed. If the personal representative rejects the claim, the creditor may file an objection with the probate court. However, the court will reject any claim that is not filed within the specified time limit or that otherwise fails to comply with the requirements of California law.

Here is a recent illustration from a Tennessee probate estate. In this case, the decedent’s wife was named administrator of his estate. The decedent’s credit union presented a claim for an unpaid credit card balance of about $2,800. The wife rejected the claim, noting it did not include an “itemized statement” as required by Tennessee law. The probate court agreed and dismissed the credit union’s objection.

Additionally, the court ordered the credit union to release funds from the decedent’s savings account to the wife. The credit union argued it was entitled to apply those funds to the unpaid credit card balance. But again, the court rejected the debt, so the credit union had no legal right to keep that money.

Making Sure the Right Person Handles Your Estate

One lesson from the Tennessee case is that credit cards are generally an unsecured debt. That is, unlike a home mortgage, the debt is not legally secured by any other property. In probate terms, unsecured creditors are the lowest priority when it comes to paying a decedent’s debts. So if the estate lacks sufficient funds to pay all valid debts, credit card issuers may simply be out of luck.

Dealing with debts is an important consideration in estate planning. You should take care to name a personal representative who is financially responsible and will make sure your creditors are satisfied–while also defending your estate against improper or illegal claims. If you need to speak with an experienced San Diego estate planning attorney about these subjects, contact the Law Office of Scott C. Soady today.

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