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.
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.
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