Credit Card Debt of Deceased

[Midwest Made]

Hello,

My mom passed away a few months ago and she had about $11k in credit card debt with two different companies. The credit card companies continue to call her cell phone and send information in the mail. The credit card debt was in her name only. I talked to one of the companies today and they said their probate department will be following up with me. Are there any recommendations on how this should be handled? Do these companies eventually stop calling after a period of time?

Thank you.

[MBB_Boy]

First, I'm sorry for your loss.

Second, YOU are not responsible for the debt. It does not pass on to you. No matter what they try and make you believe.

Third, the debt will be paid from her estate before anyone gets an inheritance.

So now the questions so everyone can help:
1. Who is handling the processing of her estate? Presumably you but want to confirm
2. Is there enough money in her accounts to clear this debt?

[alex_686]

You have 2 choices.

First, the estate can pay the credit card debt.

Second, you can disclaim any inheritance. You can't be forced to take on your parent's debt. However these things go together.

[bsteiner]

In general, her executors will pay her debts out of her assets.

[Midwest Made]

Her assets consisted of joint bank accounts with my dad and other retirement accounts with my dad as the primary beneficiary, all of which have been now transferred to my dad. I don't think she has any other assets in her name at this point, only this credit card debt. Considering this, does she legally have an "estate" that could pay the credit card debt?

[Mullins]

They have to stop calling when you tell them she's recently deceased. You ask them kindly to not call and permit time to settle the estate.
Don't pay anything right now. You don't need to pay the bills as they come in. You're in the process of collecting assets and debts.

The only bills that need tending to right now are, for example, if your mom left a house and it's going to be sold. In which case in the meantime you still need running water, utilities, paying the mortgage, insurance, taxes, upkeep, repairs... that all has to be paid as it's ongoing.

But last credit card debts, final medical expenses... you need a handle on how much that's all going to be and it can still take some months before it all comes in, which is why you don't pay anything right now because your state has a priority in which some categories must get paid first.

And, don't forget mom's 2024 income taxes which may be due.

Sorry for your loss.

[BogleTaxPro]

Her assets consisted of joint bank accounts with my dad and other retirement accounts with my dad as the primary beneficiary, all of which have been now transferred to my dad. I don't think she has any other assets in her name at this point, only this credit card debt. Considering this, does she legally have an "estate" that could pay the credit card debt?

I am not a lawyer, but I think that your dad may be on the hook mostly because of the joint bank account. Technically, she owned half of it and it should have been used to pay her debt. If they lived in a community property state, that may also throw the debt into his lap. Not sure about that, but hoping one of the lawyers will step in and help us out here.

[HoneyBee]

Credit card debt is personal and a surviving spouse is not responsible (unless it was a joint card). The estate is responsible for the debt but there is an order for debt to be resolved.

I agree with earlier poster that you should write the credit card companies and tell them your mother is deceased and the estate is being reviewed. This will stop the cards from acruing interest and late fees. You may need to send them a death certificate and you may want to ask for a final statement. You may also want to notify the credit reporting agencies that she is deceased so that no one can apply for a new card using her identification.

Sorry that you are going through this. I have been the executor for both parents.....

[pepper12]

If your mother did not leave much in assets you (or the executor, ideally) can negotiate a payoff to the credit card company. When my father passed he had a large credit card debt but no assets of note other than the house and modest contents. The credit card company is not going to make your father sell the house or furniture to pay the credit card debt, and in a community property state they could not go after them anyway. I sent them an affidavit listing the assets and debts of the estate, and we negotiated a payoff of about 20% of the amount owned. After you get a handle on the assets and debts, list them out and make them a low offer. They may take it.

[vtjon]

There may not even be an estate and no one is required to sign up to be an executor (or personal representative). The joint checking account was (likely) transfered via joint with suvivorship which would take it out of the estate (similar to TOD provisions). As noted above, there is an order to the payments/debts. If there's no estate, you (your dad mainly) could send a letter to the credit card company saying there was no assets in the estate. I did something similar when my parent passed and the credit card company went away. I believe they sent a 1099C several years later but we never did anything with it. All of this may be different in a community property state.

[prd1982]

I don't understand why your father isn't legally (not to mention morally) responsible for this debt. The IRA was part of the estate and should be used to pay off the debt. The fact that it went to the father outside of probate doesn't change things. Whether the CC company will go after the IRA is another matter.

[vtjon]

The IRA is not part of the estate because it has a beneficiary desgination and transfers on death via that desgination (and doesn't involve the executor). You can't make a somebody else responsible for the debt. IMO, nobody has a moral obilgation to a credit card charing 25% interest. The reason they charge those rates is exactly for these situtations.

[Makefile]

I don't understand why your father isn't legally (not to mention morally) responsible for this debt. The IRA was part of the estate and should be used to pay off the debt. The fact that it went to the father outside of probate doesn't change things. Whether the CC company will go after the IRA is another matter.

The IRA was protected from creditors and being that the beneficiary is a spouse, they have the option to treat it as their own IRA and so I don't see why it would lose that protection now (other than from the IRS and so forth if there were unpaid taxes).

[CAsage]

If the debt is in the mother's name solely, and it's not a community property state, then the credit card company has thin legal leverage to enforce the father (who now has Mom's assets) to pay the bills. I will observe I think there is an ethical responsibility to pay that debt off. One other poster mentioned that the creditor can issue a 1099-C form which shows discharged debt, and ... that debt is taxable income which the IRS may be looking to be reported on Mom's final tax return (which will still be a joint return in 2024).

[secondcor521]

The IRA is not part of the estate because it has a beneficiary desgination and transfers on death via that desgination (and doesn't involve the executor). You can't make a somebody else responsible for the debt. IMO, nobody has a moral obilgation to a credit card charing 25% interest. The reason they charge those rates is exactly for these situtations.

This differs from my understanding.

The IRA (actually OP only said it was a retirement account, but whatever) is not part of *probate* and not part of the *probate estate*. However, since it was her asset when she passed away, it was part of her estate. Because it was part of her estate, my understanding is that the CC company could go to probate court and get paid - either from the retirement plan or the bank accounts.

Her assets consisted of joint bank accounts with my dad and other retirement accounts with my dad as the primary beneficiary, all of which have been now transferred to my dad. I don't think she has any other assets in her name at this point, only this credit card debt. Considering this, does she legally have an "estate" that could pay the credit card debt?

Legally she did have an estate when she died - the bank accounts and the retirement plan. Again, my understanding is that her debtors (including the CC company and possibly the IRS and the state taxing authority) can go after those estate assets. Whether they will or not for $11K? I dunno, I could see it happen.

[vtjon]

With a beneficiary designation or joint with survivorship, the assets pass by title so the estate (and creditors) never has access to them. If I have a death certificate and I'm a beneficiary (and know about the account), I can go make my claim to the IRA without involving the estate within weeks of the death. I, as the beneficiary, might have no idea if the decedent even had any unsecured debts and it's not my responsibility to find out.

Although not relevant, I'm sure there have been discussions here where as estate was left with no "operating cash" to work through an estate because everything had beneficiary designations (say to continue paying the mortgage and insurance while the estate sells the house).

[LadyGeek]

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