Don’t Let Your Legacy Be “Maxed Out”: How Credit Card Debt Can Affect Your Estate Plan

You’ve worked hard to secure your legacy throughout your life, but there’s one thing that can throw a wrench into your carefully-laid plans: credit card debt. If you are running a large balance on one or more credit cards, the debt can pass on to your heirs and diminish the inheritance they’ll receive. Don’t let this one thing undo all your hard estate planning work: stay informed and get on top of the problem!

 

What Happens to Credit Card Debt When You Pass On

While the exact details of how credit card debt is handled after the holder’s death may vary depending on the terms of the individual account, in general the debt is assumed by the estate. This means that, before the assets can be distributed, the estate must pay off any debts owed by the deceased. If the levels of debt are significant, this can severely damage the legacy that the holder can leave to their heirs.

Depending on the credit card plan, the beneficiary may be more directly liable for the debt as well. For example, if the beneficiary is either a joint cardholder or a co-signer on the card, they may be liable for the outstanding debt if the estate lacks the money to pay it off first.

 

What to Do If You Inherit Credit Card Debt

If you find yourself on the other end of the equation—a beneficiary or a loved one of a recently deceased holder of credit card debt—there are things you can do to help manage the situation. The first thing you should do is notify all credit card companies of the death so that they can cancel the accounts. If you are a joint cardholder, do not continue to use the card. Next, you may want to request a credit freeze from all three of the major credit reporting agencies—Equifax, TransUnion, and Experian—to prevent anyone from opening up a fraudulent account in the deceased’s name. Finally, and most importantly, do not pay off any debt before you speak with a professional and find out what rights you have as a debtor. You may not be liable just because a debt collector says you are.

 

Frequently Asked Questions (FAQs)

1. Can credit card debt reduce the amount my heirs inherit?

Short answer — Yes. Credit card debt (an unsecured debt) must typically be paid out of the decedent’s probate estate before heirs receive their inheritance.

According to Ohio Revised Code (O.R.C.) §2117.06, all creditors have up to 6 months after death to present a collection claim against the estate. If claims are valid and there are enough assets, the estate pays those debts. Only then do any remaining assets pass to heirs. So, yes, credit card debt can reduce or even wipe out what heirs inherit, depending on how big the debt is compared to the estate’s total assets.

However, in Ohio, there are also protections in place for surviving spouses and minor children. For example, a “support allowance” may be granted before unsecure debts are paid. Unsecured debts are not last priority in the world, but they are lower on the priority list than many other obligations. This is why consulting an attorney is important: you must be aware of all the options available in your particular state and circumstances.

2. Am I personally responsible for a deceased family member’s credit card debt?

It depends on your relationship to the debt and whether you are a co‑signer, a joint account holder, an authorized user, or a beneficiary/heir.

• • • Co-signers and joint account holders are generally responsible for debt if the other person passes away. Death does not dissolve joint liability automatically. You are accountable for debts you signed onto.
    • Authorized users on credit card accounts are typically not responsible for credit card debt after death of the account holder. They can make credit card charges, but don’t usually have a payment obligation. However, this is not a hard-and-fast rule and should be investigated in the terms of your account.
    • Beneficiaries and heirs are not personally responsible for a deceased family member’s credit card debt. The estate of the deceased will inherit those debts. While you may have to manage the processing of those debts through the estate, you will not be personally responsible for paying them out of your own pocket.

3. What happens to joint credit card accounts after death?

Joint account holders are both legally responsible for the full balance of a debt. If one joint owner dies, the surviving joint owner is still obligated to pay the debt. The survivor should also notify the credit card issuer of the death and have the account closed or otherwise handled. This will prevent additional interest or charges from continue to accrue. A formal closing would also be helpful to avoid disputes.

But, in Ohio, creditors should be aware that the estate of the deceased may still be liable for the deceased’s portion (if apportioned), even though the full debt remains collectible from any joint account holders.

4. Can creditors pursue assets that are held in a trust?

Whether a creditor can reach trust assets depends on the kind of trust, how and when it was set up, and whether it was revocable or irrevocable.

Revocable trusts often do not protect assets from creditors. Since the grantor usually retains control of the trust, able to change or revoke the terms, creditors may have access to trust assets in many situations.

Irrevocable trusts may offer stronger protection. Since the assets are being removed from your ownership and control, they may fall outside what creditors can reach.

Ohio also has mechanisms like “signature‑card trusts” for bank accounts under O.R.C. § 1109.06. If properly designated, an account can be declared as “held in trust” for someone, meaning the credit account’s balance passes to the beneficiary and does not go through the decedent’s probate estate. That helps protect those assets from creditor claims against the estate, but also leaves the beneficiary vulnerable.

So, with good estate planning and debt management (choosing the right kind of trust, properly funding it, etc.), you can protect certain assets from being used to pay credit card debts or other unsecured debts in Ohio.

5. How can I protect my heirs from my credit card debt?

Here are steps, under Ohio law, that you can take to protect your heirs:

• • • Reduce or pay off credit card debt during your life. Less debts means less claims against your estate.
    • Avoid co‑signing loans or credit cards with people unless absolutely necessary. If you do, you remain liable even after their death.
    • Consider a revocable or irrevocable trusts depending on your situation.
    • Make sure your estate has adequate liquidity, or hold some assets outside probate so debtors don’t force liquidation and leave nothing for your heirs.
    • Legally document your estate plan (will, trusts, etc.), so there is clarity about how assets are to be distributed and how debts should be handled after your passing.
    • Work with estate or probate attorneys in Ohio to tailor your plan to state law.

 

Contact Deliberato Law Center

If you have any questions about how credit card debt can affect your legacy, do not hesitate to contact the experienced estate planning attorneys at the Deliberato Law Center. We’re here to help you preserve your legacy and prevent the inheritance your loved ones receive from being “maxed out.” Give us a call today at (216) 341-3413 or fill out the form below to find out more.