Debt After Death

Is a widow(er) responsible for the deceased spouse's credit card debt if the widow(er) was an authorized user?

Is a widow responsible for her deceased husband's credit card debt? Widow was ONLY an authorized signer in Minnesota.

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  • An authorized user may make purchases, but is not responsible for a credit card bill.
  • Spouses have separate debt in common law states.
  • In community property states, spouse share liability for debt.

The short answer to your question is “probably not.” Allow me to discuss a few issues before addressing your question specifically.

Authorized User / Authorized Signer

Many credit card issuers allow the applicant to add authorized users, which are sometimes called authorized signers, to be added to an account. The authorized user will be issued a card in his or her name, and their name and address will be noted on the account. The authorized user is permitted to make purchases with the credit card, but is not responsible for paying the bill.

When the account holder dies, the credit card issuer's customer service representatives (CSRs) may contact authorized users and family members to collect the balance on the account. The CSR may state or strongly imply the authorized user is responsible for the balance. This is untrue for every credit card contract I have seen. The CSR may tell family members who have no connection to the credit card at all that the family is responsible for the debt. That is also untrue as we will learn in a moment.

There is a hidden cost and benefit for authorized users. If the account it paid promptly and the balance is low, the authorized user receives a boost to his or her credit score. Conversely, if the account is delinquent or the balance is high, those two factors will drag an authorized user's credit score down. This is called piggybacking. See the Bills.com resource Piggyback Credit to learn more.

Deceased Spouse's Debt

Some people assume a decedent's debt is forgiven or possibly written off by creditors. The law does not work that way, with the exception of federal student loans. However, spouses or other relatives are not responsible for the decedent's debt automatically, either. Many CSRs and collection agents take advantage of a debtor's grief and ignorance of the law to imply the family must pay the decedent's debt, but that may not be the case.

When a person dies with a will, the will controls the financial affairs of the decedent's assets, which is called the "estate." A will distributes assets, not debts. However, before any assets can be distributed to the heirs, all known debts must be paid by the executor. Therefore, the executor will sell assets in the estate to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will.

If a person dies without a will, this is known as "dying intestate" in lawyer-speak. In this situation, the court appoints an administrator to handle the distribution of the decedent's assets according to the laws of the state. As with dying with a will, assets are distributed after debts are paid.

Here is a key point: If the estate is insolvent the creditor has no legal right to collect the debt from family members, children, or friends. There is no feudal debt bondage that ensnares an entire family, at least not in the US.

Debt in Common Law States

In the so-called common law states, which is 40 of the US states, each spouse has separate property before during and after marriage. A spouse signing a credit card contract in his or her name binds himself or herself to the contract alone. The creditor cannot collect from the spouse if the signor becomes delinquent on the debt or dies. However, the question becomes more complicated in community property states.

Debt in Community Property States

Community property states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally speaking, in community property states, debt incurred by a spouse for the benefit of the family is considered a "community" debt, and therefore the spouse is responsible for repaying that debt. However, debt that clearly did not benefit the community, such as if a spouse goes into debt to buy a paramour an expensive gift, the community may not be held responsible for such debt.

No two community property states use exactly the same laws. As a consequence, if you live in a community property state and have a spousal debt issue, it is imperative you consult with an attorney in your state so that you understand your rights and liabilities in your particular circumstances.

Your Debt After Death Question

You mentioned you reside in Minnesota. When it comes to family law, Minnesota follows common law. This means that if you were not a joint applicant of the credit card account and were only the authorized user / authorized signer, then you have no personal liability for the debt.

However, the debt does not disappear automatically. As discussed above, the decedent's estate must be probated. If the decedent was insolvent, then there is nothing for the creditor(s) to collect from the estate. In that case, they must write-off the debt. However, if the decedents assets where greater than his or her debts, the assets must be liquidated and the creditors paid. The remainder will be distributed according to the decedent's will or estate plan. If there is no will, then the assets will be distributed according to state law.

For additional information, see the Federal Trade Commission documents Paying the Debts of a Deceased Relative: Who Is Responsible? and FTC Issues Final Policy Statement on Collecting Debts of the Deceased.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

10 Comments

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  • LP
    Mar, 2013
    Lois
    My father is age 90. He put me in charge of handling his estate, etc. He is going to put his mobile home into a trust with my brother as a beneficiary. My question is this: Will Kaiser Permanente attach a lien to the house for their payment if he owes them money after he dies, or will they make the beneficiary sell the mobile so their bill can be paid right away? Thanks
    0 Votes

    • BA
      Mar, 2013
      Bill
      The answer to both questions is "maybe, depending your state's trust laws, and how aggressively the creditors contest the trust."

      Generally, the ownership of property held in properly created and executed living trust is transferred to the beneficiary(ies) the moment creator of the living trust dies. The property does not travel through the state's probate process. However, depending on the decedent's state laws, the executor of the estate will need to disclose the existence of the trust when he or she discloses the estate's assets to the probate court. At that point, an aggressive creditor may challenge the transfer of the trust's property to the beneficiary(ies) and ask the court to consider the beneficiary(ies) liable up to the value of the property they received.

      Important point: Beneficiary liability varies by state. Your state may consider property transferred via a living trust to be untouchable. The opposite may true. Consult with a lawyer in your state who has wills and trusts experience to learn which rule applies in your situation.
      0 Votes

  • KV
    Jan, 2013
    kay
    My dad passed away last march. His credit cards were forgiven but my mom says she is going to have to pay taxes on the forgiven debt even though her names were never on the card. Is she responsible for paying the taxes on the forgiven debt just because she was married to the card holder and he has since passed away?
    0 Votes

    • BA
      Jan, 2013
      Bill
      Urge your mother to consult with a tax lawyer or probate lawyer in your mother's state of residence. If, as you wrote, your mother was not a joint account holder on your father's credit cards, I do not see her having tax liability for the forgiven debt income. The forgiven debt income is part of your father's estate, and the executor of your father's estate should include the forgiven debt as part of the probate process.
      0 Votes

  • AH
    Mar, 2012
    Alleede
    My father died recently. I am the only surviving family member. We live in Florida. My father had added me as an authorized user on his Chase Visa. I received a card with my name. I don't know if he gave them my address, but I know he did not know my social sec number. During some tough times a couple of years ago, I lived off of the card. I have been making the minimum monthly payments online out of my checking acct. This card has not appeared on my credit report. Will they come after me if I stop making the payments? There is no estate, he died with no assets, no life insurance and about $500 in his bank account. Since they have my bank info, can they go after my bank account? Thank you
    0 Votes

    • BA
      Mar, 2012
      Bill
      Even if your dad only had $500 in his bank account, he had an estate. You should speak with an estate lawyer. Generally, an authorized user is not liable for debts on another person's card. Discuss with the lawyer how your use of the card to live on affects this general rule.
      0 Votes

  • JV
    Jun, 2011
    Jenny
    My friend recently passed away, his family is concerned about the responsibility of his debt. We live in WI. He was married 7 years ago, they split up very soon after and maintained separate residences for the entire length of the marriage. The final divorce hearing was scheduled for a month after he died. His debt does not include any credit card bills. His family did not create an estate, he had no assets. Some of the medical bills are from 5 years ago. He had back due child support due to the state. The rest of the debt is miscellaneous and under $1000 each (court costs, traffic violations, cell phone, utilities, rent, etc.). His father is receiving his mail - the collection notices from some of the creditors writing ' deceased' on them and returning them to sender. I am wondering if his wife, even though they maintained separate residences, will be held responsible for this debt? What actions can we take to stop any collections, inform the creditors, and tie up these loose ends? Can anyone in his family be held responsible for this kind of debt?
    0 Votes

    • BA
      Jun, 2011
      Bill
      A decedent with any assets or debts has an estate. An estate must go through the decedent's state's probate process. The decedent's family should consult with a lawyer who has probate experience to learn how to dispose of the decedent's assets and liabilities.

      Returning a payment notice to a creditor with the word, "Deceased" on the bill is not sufficient to notify the creditor that the borrower or debtor has passed away.

      The surviving spouse should consult with a lawyer to learn what, if any, liability the spouse has for the decedent's liabilities. You mentioned Wisconsin. Wisconsin is a community property state, but it protects spouses who are not given notice of the other spouse's debts. Again, the surviving spouse must consult with a lawyer in her state to learn her liability.
      0 Votes

  • TS
    Apr, 2011
    Teresa
    Would the surviving spouse living in Minnesota be required to claim the amount forgiven as income for tax purposes? There was a protection plan on the credit card that was not a joint account.
    0 Votes

    • BA
      Apr, 2011
      Bill
      Consult with a Minnesota lawyer who has probate or tax experience. I am not a Minnesota lawyer, and therefore am not competent to give you legal advice. In my opinion, which as I just explained is meaningless, because Minnesota is not a community property state, and because the account in question was the decedent's separate property, the surviving spouse received no benefit for what I presume is a 1099-A or -C issued to the decedent. The decedent's estate may have received a benefit, but the decedent's estate is not synonymous with the surviving spouse. Again, consult with a Minnesota lawyer.

      You mentioned a "protection plan on the credit card." These are typically insurance policies that pay the balance if the cardholder dies. If the protection policy was indeed an insurance policy, then there there is a benefit, but benefits are typically not taxable.
      0 Votes