What happens to credit card obligations when a loved one dies?

Most people wouldn’t mind a surprise inheritance after the death of a loved one — but not if that revelation is credit card debt rather than an unexpected windfall.

One of the last things you want to deal with after the death of a loved one is his or her credit card debt. Depending on the type of account and laws where you live, dealing with credit card obligations after the death of a loved one may be a fact of life. The sooner you know what you’re dealing with, the better.

State of the Estate

After death, an individual’s estate is responsible for paying credit card balances and other existing debts. When an estate is in probate, secured debts backed by property such as a mortgage on a house or a loan on a car are prioritized above unsecured debts like credit card debt. This means if a person died with more debts than assets, credit card companies typically must write off the balance. They could still try to recoup debt from family members, even if no family members are liable, so it’s important to know where you stand legally. In some instances, a spouse or other close family member may indeed be liable.

Joint Responsibility

Your obligations will vary widely depending on whether you’re a joint account holder or simply an authorized user on the credit card account.

Joint account holders co-signed for the account and share the responsibility for paying any debt that is accrued on an account. The account will appear on both people’s credit history and responsible credit card use can boost both of your scores. Similarly, poor behaviors like overspending and missing payments can hurt you both.

An authorized user is someone you’ve authorized as a user on your account. This is often a spouse, but it could be a roommate you’re splitting bills with or someone else you trust with your credit card. The account owner is 100 percent responsible for paying any charges accrued on the account.

Keep in mind that some card issuers do not offer joint credit card options. For example, American Express has never offered joint cardholder accounts. If you’re unsure whether you’re a joint account owner or authorized user, a quick call to your credit card company will clarify the matter.

Unfortunate Events

If you’re a joint account holder and the other cardholder dies, you are still responsible for paying off any remaining balance — even if your significant other was the one who did the swiping.

If you’re simply an authorized user, you generally bear no responsibility for payments after the card owner has died. However, there are a few exceptions. If you live in a state with community property laws, things may be different. Community property states view all assets acquired during a marriage to be “community property.” Or, in other words, automatically the property of both the husband and the wife. So, credit card accounts opened by either the husband or the wife may be automatically considered joint accounts. This means the surviving spouse could be on the hook for payments on credit cards that were solely in their loved one’s name. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states. Alaska is considered an opt-in community property state; both parties are given the option to make their property community property.

Next Steps

It’s a good idea to contact all credit card companies and let them know the cardholder has died and to request the account be closed. You may need to provide a copy of the death certificate. The executor of the will, if there is one, will likely be responsible for these tasks.

A credit card company cannot add new late fees or annual fees to a credit card bill while an estate is being settled, according to the Credit Card Act of 2009. Also, the act gives an estate 30 days to pay the balance in full and avoid additional interest charges after the final bill is furnished.

Stop using any credit accounts if you’re an authorized user; this could be considered fraud, especially if you know the account holder does not have assets to cover the transactions.

Experts also recommend alerting the three major credit reporting bureaus to prevent identity theft. Request a copy of your spouse or other loved one’s credit history so you can make sure you close all open accounts. You can also request to be notified if there are any attempts to open accounts in their name, and ask that a note be added to the report stating, “Do not issue credit.”