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What Happens to Your Credit Cards After Your Death?

fine blue image of classic credit card background

If you have bills and expenses that exceed your regular income, you may have some credit card debt. Debt often matters in estate planning when figuring out how to leave an inheritance to your relatives. Most debts do not go away when the borrowers pass away. For that reason, it is important to consider your total debt when creating your estate plan.

Is Credit Card Debt Discharged on Death?

In general, credit card debt does not get discharged after the cardholder’s death. Instead the debt becomes part of the cardholder’s estate. The estate executor or administrator gathers the estate and reports on it to the court. Then the executor must give notice to all creditors, including the credit card company, that the borrower has died. The creditors can make claims against the estate for the amount of any debts.

The total estate gets reduced by the amount of debts owed. If the debts exceed the estate assets, then each creditor will receive partial repayment of the debt owed to it. But in this situation, the heirs will receive nothing.

Will Heirs Have to Pay Off Credit Card Debt?

Most heirs have no obligation to pay off credit card debt, except the cardholder’s co-cardholder or spouse. A co-cardholder becomes liable for the full amount of the credit card debt. A spouse becomes liable for the debt if the debt is considered community property. If the cardholder incurred the debt before the marriage, the spouse probably will not have to pay it back.

There are several other exceptions that allow spouses to avoid paying off credit card debt. For example, many couples sign prenuptial or antenuptial agreements (pre-nups and post-nups) specifying that each spouse is not responsible for the other’s debts.

How Can Estate Planning Help?

Estate planning can help you pass on your inheritance to relatives without problems with credit card debt. For example, you could place your house and other valuable assets in a trust, and make your relatives the trust beneficiaries. With the right language in the trust document, the assets will not become part of your estate. The credit card companies will not have a claim against the assets to pay off the credit card debts after your death. Talk to a knowledgeable California estate planning lawyer to learn more about your options.

Worried about leaving substantial debts to your heirs? Angela Klenk, Esq. and the team at Beach Cities Estate Law couple personalized attention to your estate plan with big law firm experience for a winning combination to give you peace of mind. To schedule a case evaluation, visit Beach Cities Estate Law online or call Angela’s office at (424) 400-2125.

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