Handling Debts after a Spouse is Death: Who is Responsible?
Who’s Responsible for Credit Card Debt?
The answer depends on several factors, including the type of account and where the deceased lived.
With a joint account (in other words, both spouses' names are on the account), the debt is considered to be that of the surviving spouse, who is then responsible for settling any outstanding balance along with (or instead of) the deceased’s estate. Moving forward, the surviving spouse can either close the account or re-title it in his or her name.
In situations where the surviving spouse is merely an authorized user (in other words, a “second cardholder”), the debt is considered to be that of the deceased, and the surviving spouse is generally not responsible for payment. In this case, the deceased's estate may be liable for settling the debt.
There’s also the issue of individual accounts — cards issued solely in the deceased spouse's name. In many cases, the surviving spouse is not personally responsible for the debt. However, it can get complicated in the case of debt accrued during marriage if you live in one of 10 community-property states. The credit card debt may be considered joint property under the laws of Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Check your state’s laws for more details.
Ultimately, any debts that the surviving spouse is not responsible for are paid by the deceased's estate. The person designated to settle the estate (the executor) pays off the debt using whatever assets are in the estate. Note that in the case of debts that are solely those of the deceased spouse, creditors cannot demand more than the value of the estate. For example, if the credit card debt is $12,000 but there is only $2,000 left in the estate, the credit card company may have to write off the remainder.
Getting the Word Out
To keep identity thieves from pillaging the open credit file of a deceased loved one, it’s smart to immediately alert credit-reporting agencies of the death. Add a "deceased notice" and a "Do not issue credit" statement to the file. Also ask to be alerted if any new credit applications are made in the spouse's name by sending a written request via certified mail to Experian, Equifax and TransUnion. (Be sure to include a certified copy of the death certificate.)
It’s also a good idea to request a copy of the spouse's credit report for an up-to-date record of any open credit cards. Any other creditors (auto loans, banks, etc.) should also be notified of the death — they will likely require certified copies of the death certificate as well.
Know Your Rights
The time following a loved one’s death can be both emotional and confusing. Many people have never had to deal with the complexities of settling with creditors and closing accounts before. But there are some protections during this trying time.
For instance, the Credit Card Act of 2009 prohibits credit card issuers from charging late fees or annual fees while the estate is being settled. Likewise, Federal Trade Commission guidelines limit the practices debt collectors can employ when trying to get money from the deceased’s relatives. For assistance, consider searching for an estate-planning attorney in your area on the American Bar Association's website (www.americanbar.org).
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