As with everything in life, how credit and debt are handled after death have some exceptions. If you have not read R.I.P. an introduction to how debt is handled for the deceased, do yourself a favor and click the link now to get caught up before you read any further. Now that you are up to speed, we can begin to explore some of the exceptions to the rules that were discussed in the article above.
First of all, not all assets go through probate. There are some items that pass directly to whomever is named the beneficiary. Items such as 401(k)s, IRAs, brokerage accounts, and insurance fall into this category. In many cases these assets are not considered part of the estate. Therefore, selecting and updating your beneficiary designations to reflect any family changes or adjustments is critical when it comes to your credit and debt after death.
Without going through probate, the executor of the estate can not use them to pay estate debts and outstanding bills.
Can The Credit Card Company Collect From the Beneficiary?
To answer this question we must look at these assets separately. There are federal laws protecting 401(k)s consequently keeping them safe from the effects of debt after death. Many states do also allow homes to be transferred from spouse to spouse without intervention from creditors. Like the 401(k), the family home is often protected by law. Insurance often passes outside the estate and, in most cases, is safe from the collection efforts of creditors (with the exemption of IRAs in some states).
Will I Be Hounded About Debt and Credit After The Death Of My Loved One?
Spouses, children, or any second party who are authorized to share a credit card with a deceased person must know this one distinction; authorized user vs. co-signer. As an authorized user alone you are not personally responsible for the credit card or the debt. If you experience attempted collection for any of these items get ready to begin the dispute process. After confirming your legal standing, be prepared to write dispute letters requesting to have these items removed.
What About Collection Calls?
There are three things to determine when you begin receiving collection calls after surviving a death.
- Is the debt valid?
Do everything you can to confirm that your deceased loved one was legitimately responsible for the debt.
- Has the statute of limitations expired?
Creditors and collection agencies must work within a time limit to collect on a debt. Once the time limit expires, the law no longer supports collection attempts.
- Are you in any way liable for the debt?
If the debt was acquired as a result of a joint venture with the deceased where you both signed documentation legally binding you both to the debt, then you can and most likely will be held liable after the death of your loved one.
Handling collection calls is a matter of knowing your rights. Never rely solely on the words of the collection agent or creditor. Some collection agents may go as far as to tell survivors that they are liable when they are not. Some creditors may even lie to manipulate a payment.
So what do I do when my loved one passes away?
When your loved one transitions from life, the executor of the estate should notify the creditors. If you personally are taking on that responsibility, you will need to contact each creditor individually. Start by gathering all their bills, call each credit card company, and inform them that the account holder has died. You will need to mail in a certified copy of the death certificate. Along with the death certificate you will include the name and credit card account number of the deceased. Always retain a copy for your personal records.
If you are not the executor and you receive questions about payment, refer them to the executor. Be careful not to make any promises of payment until you are able to confirm all assets and bills of the estate and your related rights. Occasionally, a creditor will allow one to take over the account of another as long as you agree to assume the debt and are able to pass a credit check. Based on your credit, you may or may not inherit the same credit score and credit limit as the deceased.