One of the biggest concerns that people have when it comes to estate planning is whether their loved ones will be responsible for their debts after they are gone. This is particularly the case with unpaid credit card debt. So, who is responsible for your existing credit card debt when you die? The answer may depend on two important factors: whose name is on the credit card account, and where you live.
Credit Card Debts Paid By the Deceased’s Estate
Upon your death, your estate becomes responsible for any outstanding debts you leave behind. Your estate will go through probate, and an executor or administrator will determine what assets you have available. These assets will then be used to pay off your debts in the order required by state law.
If your assets are not sufficient to cover your credit card debts, they will typically go unpaid. The credit card company will be forced to write the debt off; the debt will be dissolved and it will not pass on to your heirs. In a case where your credit card is only in your name and you’re not married, that’s the end of the story.
Two major exceptions exist to this general rule which may make others responsible for your credit card debt after your death: if you have a joint account, or if you’re married in a community property state.
Joint Card Holders
If there is a joint cardholder on your account, meaning that someone else co-signed for the credit card, that person will likely be responsible for any existing credit card debt when you die.
The same is not true of authorized users, who are generally allowed to use the card but do not pay the credit card bills. However, authorized users should be careful to stop using the card after the primary cardholder dies. Continuing to use a credit card when you know the existing debt won’t be paid may constitute fraud, and could lead to criminal ramifications for the authorized user.
Community Property States
The general rule that credit card debt does not transfer to your spouse upon your death may not apply in community property states, of which California is one (along with Arizona, Idaho, Nevada, Louisiana, Texas, New Mexico, Wisconsin, Washington, and, in some cases, Alaska).
Under California law, credit card debt incurred during a marriage is considered community property. That means that, in most cases, your spouse becomes responsible for that debt when you die, even if your spouse doesn’t know about or didn’t agree to the debt.
Estate planning can be complicated, and dealing with the estate of a deceased loved one is an emotional process. Hiring an experienced estate planning attorney will ease the burden. The attorneys at The Law Offices of Omar Gastelum & Associates are here to help guide you through the estate planning and probate processes, giving you the peace of mind you need. Contact us today to discuss your situation and any concerns you may have about credit card debt.