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.
- 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.