In some states, the surviving spouse may be responsible. Authorized users are generally not held responsible for the deceased's unpaid balances. While your heirs may not be legally responsible for paying your debt outright, all debts must be settled before any loved ones can receive their share of the inheritance. There are a few workarounds to this, including setting up an eligible trust fund, but you'll need to hire an estate lawyer to set one up and it requires planning well in advance.
Probate laws differ from state to state, but if you have any joint account holders on your credit cards, you should come up with a plan in case either party passes away. To get a better sense of what the probate laws are in your area, visit your state court's website or speak to a local estate attorney.
If ballooning credit card debt keeps you up at night, there are steps you can take to get your balance under control. Pull your free credit report and sign up for a free credit monitoring service so you have a clear picture of all your debt. CNBC Select also recommends Experian free credit monitoring , which could help you track your balances if you want to eliminate the stress of debt and pay off some of those cards.
A probate court must accept any executor named in a will. While credit card debt cannot be inherited by family members who survive you in death, it can impact how much of your estate is left to your inheritors, as debts will be paid out of the estate first. Creditors will have a set amount of time after death in which they can file a claim against the estate, and this amount varies by state. Often the deceased have specifically stated in the will which debts will be paid by the estate.
Otherwise,the executor can order debts to be paid, according to Tayne. If a consensus cannot be reached, a probate court will decide, based on state law, who will become the executor. There are exceptions. In this case, if a spouse died and left debts unpaid, the surviving spouse would be responsible for paying them. Other special cases arise with joint card holders and guarantors.
When you get a credit card, you become the guarantor of the account — meaning you make a legal promise that the debt will be paid, according to Tayne. A common example of this is when someone has an authorized user on a credit card — the primary card holder is the guarantor and responsible for paying the debt. Authorized users would not be obligated to pay the debt if a primary card holder, or guarantor, dies. However, if an authorized user dies, the card holder is responsible for the debt accrued by the authorized user.
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