What happens to credit card debt when you die

Ask the expert: What happens to credit card debt when you die?

Question: My grandmother died recently, leaving me and my brother a few thousand dollars. After reading your website, I used most of the money to pay off my credit cards. (I admit I spent the rest on a fancy dinner with my girlfriend.)

So my question isn’t about money, really. It’s a hypothetical: My grandmother used cash for everything and never even had a credit card in her name. But what if she would have died with $20,000 in credit card debt? What happens to credit card debt when you die? Since we were named in her will, would my brother and me be forced to pay that?

— Chris in Nashville

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fastFirst, I must tell you: I’m happy you took your girlfriend out for a nice dinner. It’s a common misconception that financial experts are boring stuffed suits who don’t want anyone to have fun.

The whole point of being responsible with your money is to have fun, whether it’s enjoying a nice family vacation, taking care of that family’s financial needs, or just savoring the peace of mind that comes from being debt-free.

Now to answer your question — which, of course, comes with some caveats. I’ll quote the Federal Trade Commission, which says…

After a relative dies, the last thing grieving family members want are calls from debt collectors asking them to pay a loved one’s debts. As a rule, those debts are paid from the deceased person’s estate.

That means any debts are paid with money from the assets of the deceased. Once those assets are gone, so are most unpaid debts.

Of course, every rule has its exceptions. In this case, the biggest danger is when a relative dies and you’re a joint cardholder — which is different than being an authorized user. A joint cardholder actually co-signed for the card — which means you’re on the hook for the bill.

This is common among parents who co-sign for their children or their elderly parents. It’s also something to watch out for if you’re divorced. Sometimes as part of a settlement, one ex agrees to pay off the joint credit card they got when still happily married. If that ex dies, the debt reverts to the other ex — the joint cardholder.

For more on how death affects debt, here’s a straightforward explanation from the FTC called Debts and Deceased Relatives.

I’ll end this answer by telling you, Chris, that I’m sorry for your loss but very pleased with how you used your grandmother’s money to pay off your credit card debt. As a parent myself, I always want whatever money I provide my children to have a long-lasting impact. I’m sure your grandmother would smile knowing how many more opportunities await you now that you’re debt-free.

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Have a debt question?

Email your question to editor@debt.com and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

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