Tuesday, August 13, 2013

What Happens to Credit Card Debt When You Die?

No one wants to face a situation where they have to deal with losing someone they care about. It’s only made worse if debt is involved. What happens to debt after you die depends on who has signed for it, as well as the laws in your individual state.
  • If you have a joint account with your deceased loved one, which you have co-signed for, then you become responsible for that debt. Keep in mind that “authorized users” who aren’t joint account holders are not responsible for the debt.
  • If you aren’t on the account, you don’t inherit the debt. Instead, the debt should be paid off with assets from the estate. In cases where there are unpaid debts when your loved one dies, the Successor Trustee of your trust or the Executor of your Will should use the assets to pay off debts. Secured debts (mortgage, car) are paid first, and unsecured debts, such as credit cards, are tackled next.   
  • If there is not enough money to pay all the debts, some creditors might have to take a loss – every state has laws specifying which types of creditors have priority over others.
It’s always a good idea to talk to an estate attorney and get an expert opinion regarding your specific situation. Did you know that more than 120 million Americans do not have estate plans to protect themselves or their families from the unexpected?  For peace of mind, the time to address or update your estate plan is now. If you live in Virginia, DC, or Maryland, please call the DC Metro Estate Planning Law Firm of Evan H. Farr, P.C. today at 703-691-1888 to set up a no-cost consultation.

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