How to Handle Credit Cards for a Deceased Person
The Federal Reserve Bank of New York reports that Americans have a collective $1.25 trillion in credit card debt. When a person passes away, there must be a plan of action for handling any remaining credit card debt. At Poulos LoPiccolo PC, we help families develop proactive estate plans and resolve issues during probate. Here, our Monmouth County estate planning lawyer discusses how to handle credit cards for a deceased person in New Jersey.
You Should Notify the Credit Card Companies and Secure Any Accounts
One of the first steps is to identify all credit card accounts held by the deceased person and notify each issuer of the death. The personal representative may be asked to provide documentation, such as a certified death certificate and proof of authority to act for the estate. Recurring charges associated with the cards should also be identified and addressed. Family members and authorized users should not continue making new purchases on an account belonging solely to the deceased cardholder.
Note: Notifying the issuer and closing the account does not eliminate an existing balance. The balance becomes an issue that must be addressed as part of estate administration.
You Must Determine Who is Responsible for the Credit Card Debt
A deceased person’s credit card balance generally does not automatically become the personal obligation of a spouse, child, or other beneficiary. Instead, debts that remain legally enforceable ordinarily must be addressed from the deceased person’s estate. The Consumer Financial Protection Bureau (CFPB) states clearly that merely serving as executor or administrator does not make the fiduciary personally responsible for the decedent’s debts. The nature of the account matters. Still, the estate, assuming it’s solvent, is generally responsible for paying credit cards.
How Credit Card Debt Actually Gets Paid (After a Death in New Jersey)
Solvent Estate
If the probate estate has sufficient assets to satisfy all valid debts and expenses, the personal representative generally pays properly presented credit card claims from estate assets, not from the representative’s own funds. Before making final distributions to beneficiaries, the representative should identify valid claims and preserve enough estate property to satisfy them. In other words, credit card debt is ordinarily paid before beneficiaries get their distribution.
Insolvent Estate
If the estate does not contain enough applicable assets to pay every claim in full, the personal representative cannot simply pay creditors on a first-come, first-served basis. New Jersey law establishes an order of priority under N.J.S.A. 3B:22-2. Reasonable funeral expenses and costs of estate administration are among the claims receiving statutory priority. Unsecured credit card debt generally falls lower in the priority. No family member is liable for credit card debt if they are not a co-signer on the account. If there are insufficient funds to pay, the debt can be written off.
Contact Our New Jersey Estate Planning Lawyer Today
At Poulos LoPiccolo PC, our New Jersey elder law attorneys provide comprehensive legal representation to people and families. We are well-versed in estate planning and probate law. If you have any questions about handling credit cards for a deceased person, please do not hesitate to contact us today for a strictly confidential consultation. From our law office in Monmouth County, we provide estate planning and probate law services statewide in New Jersey.
Source:
newyorkfed.org/microeconomics/hhdc
