Do you or your elderly parents have credit card debt? After experiencing such a significant dip in our economy, I imagine there has been a rise in credit usage among Americans.
The good news is this: one cannot pass on debt to a loved one after death. Legally, credit debt from individual card owners cannot transfer to spouses, children or any other immediate family members.
For this reason, the National Academy of Elder Law Attorneys suggests to steer clear of joint credit cards. If one of the card owners passes away, the debt is then transfered over to the other co-signer. The best situation, the academy claims, is to have one person apply and sign for the card and then tack on other users to the card. This way, only one owner is held responsible for the credit and debt of the card.
Although many credit card companies will hassle mourning families about the debt of the deceased, it's important to stand your ground and research your legal rights.
“You have to establish the ownership of that debt — that’s the first thing you do. If there are no co-signers, really you want to distance yourself as much as possible from it,” advises Jean Setzfand, Director of Financial Security at AARP.
Being proactive when a death occurs helps in the long run. Calling the companies to alert them of the death in most cases will even cause them to cut all interest charges. You may even acquire proof of credit card ownership from the bank to keep on file.
I.R.A. accounts or retirement savings which are not "in trust," are money-smart avenues that state clear beneficiaries, and cannot be used by banks or credit companies to pay any debt after death.
Commenting on the headaches of settling inheritance, Setzfand adds, “If you make it well known who owns what, both in terms of assets as well as liabilities, you can prevent a lot of this from taking place outside of your control.”
For more financial tips on wills and estate planning, visit: http://www.aarp.org/money/estate-planning/info-11-2010/kip_forces_that_affect_your_estate_plan.html or https://www.massnaela.com/faqs.