Question: I have a question that I couldn’t get a straight answer for. My mother in law just recently passed away. She didn’t have many assets, other than a small pension and life insurance from work.
She DID have some money in her credit union that has my wife as a joint account holder. My mother in law also had a credit card from the credit union that has a balance. My wife is NOT on the credit card, just the checking account.
Will the credit union just take the amount of the balance out of the account? Or do they have to go through the courts to get payment?
— JP in California
Howard Dvorkin answers…
First of all, my condolences on the passing of your mother-in-law. Second, this isn’t what you wish to hear: You should consult an attorney.
Why? Because there are some complicated variables at work here.
What Happens To Your Credit Cards When You Die
My mother in-law just died. So what happens to her credit cards? A readers wife is wondering what happens to her mother’s assets and debts.
Noone enjoys talking about that especially if it’s your own, but certainly your loved ones also. Maybe that’s why less than half of all Americans have wills according to art. That’s a shame because families have enough to stuggle with when someone dies.
Adding financial burdens only makes it worse. Even if you don’t create a will you could still take precautions to ensure your money gets to your loved ones. In today’s example the mother-in-law could have transferred some assets in advance to her daughter and her daughter’s husband.
Since most debts die with you other people can’t be forced to pay them off. Noone wants to hear the words “you need a lawyer”. Well, when it comes to estate planning it’s worth the effort.
What you spend on either a lawyer or a reputable online service will save you money and possibly legal trouble in the future. And, once you get past this unpleasant topic, you have peace of mind for the rest of your life.
For more details on this and other topics check out Debt.com.
Typically, when someone dies, any outstanding debt is a liability of their estate. If that person dies with money in the bank, that money pays off those debts. What if there’s no money left at all? Creditors will attach a claim to the estate, but it’s not usually worth their time to pursue it.
Normally, most credit card applications include a clause that allows the financial institution to attach other assets held by the same financial institution. In other words, your mother-in-law’s credit union might have rules that allow it to take money from the joint bank account to pay off the credit card.
Notice how I use words like “typically,” “usually,” and “normally.” That’s because I’m not sure what rules your particular credit union has. I also don’t know if the title of the bank account is “joint tenancy with right of survivorship.” If so, I believe the funds can’t be confiscated by the creditor.
I urge you to contact a lawyer who has experience in estates, because each state can have different laws.
One possibility, but with a big warning…
You might consider withdrawing all the funds in the joint account so no one can get to them first. However, I don’t know which of the two owners actually contributed the money to the bank account. You could get yourself in a bind if it was your mother-in-law — you might be breaking a law. So you can see why I’m so adamant that you consult an attorney.
Finally, you need to consider the return on your time and expenses. You don’t say how much money is in the joint bank account, or how much is owed on the credit card. If the amounts are smaller than an attorney’s fee, you might want to forget the whole thing.
Have a debt question?
Email your question to firstname.lastname@example.org 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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