What Takes Place With Credit Card Debt After Death?

What Takes Place With Credit Card Debt After Death?

What Should Be Done With Credit Cards Right Away After Death?

There will likely be many persons the executor of a deceased person’s estate must notify of the death and, in some cases, accounts and debts the executor must settle in the deceased person’s name. Due to its classification as unsecured debt, credit card debt is often paid off last from an estate’s available assets.

Those in control of an estate should contact credit card providers immediately to prevent any further charges. In the event that a credit card is lost or stolen, this measure will assist prevent fraudulent purchases from being made automatically and on a regular basis.

Preparing a Death Notification for Credit Card Companies

Most financial institutions need proof of death before closing an account or stopping collection efforts. In order to be prepared for requests from creditors and other lenders for copies of death certificates, we advise executors to order several copies in advance.

Though it may seem overwhelming during an emotional time, notifying creditors and lenders of a recent death is vital to safeguard loved ones from financial and legal concerns surrounding any outstanding debt. Because the bank or credit card provider will either shut the account or make the surviving account holder the principal or sole account holder, this might be especially essential if surviving loved ones hold joint accounts with the deceased.

If the survivors continue to use the joint card without paying off the bill, their credit ratings may take a hit without their knowledge if this is pushed off for too long.

Put away your card

If you possess a shared credit card with a loved one who has passed away, you should not use it until you have informed the credit card provider of the tragedy. Any credit cards on which the decedent was the sole account holder will have any outstanding balances and interest charged deducted from the estate before the beneficiaries receive their share. After the principal cardholder’s death, it is generally technically fraudulent for an authorized user to continue using the card.

Alert Me To Future Charges

It is also crucial to monitor any automatic payments that may be connected to the deceased’s credit accounts. Payments could be received on a periodic basis, such as monthly for a subscription service. Extra copies of the death certificate could be important in these circumstances as well, since all charges should cease after official notice of the death has been given. Credit card payments for utilities, for instance, might result in the disconnection of services to residences if bills go unpaid.

Anti-Identity Theft Measures

Identity thieves frequently use the credit card numbers of the recently deceased. Obituaries and recent death records are common targets for identity thieves looking to get access to unsecured information or current financial accounts. Even if it’s unpleasant to think about, you shouldn’t leave your loved ones open to deception during such a vulnerable moment.

In addition to contacting credit card companies to close out a deceased person’s accounts, family members or the executor of the estate can take steps to prevent fraudulent account use by freezing the deceased person’s credit with one of the three major credit report bureaus (Equifax, Experian, or TransUnion). Taking this simple step will prevent identity thieves from gaining access to the deceased person’s credit report or opening new accounts in their name. After this is done, the credit bureau will likely ask for the deceased person’s SSN or a copy of their death certificate, as well as details about any open accounts that need to be terminated.

Where does the current debt sit?

Debt does not just vanish when we die, but neither does it become a burden on our loved ones. It is rare for surviving relatives to be expected to shoulder the financial burden of settling a deceased loved one’s debts. However, before heirs receive their share of an inheritance, the estate must be divided. In rare situations, this might result in the sale of family houses or other assets that heirs were counting on receiving being liquidated to pay off debts.

If your debts outweigh the value of your estate, your creditors may go after your heirs, albeit this will depend on the specifics of the inheritance and the nature of their financial ties to you. It’s called “filial responsibility” and it applies in some jurisdictions to children who are legally responsible for their deceased parents’ medical expenditures.

When someone dies, their debts are typically written off.

In what ways might valuables be shielded from debt collectors?

Credit card debt is typically not a creditor’s first priority because it is unsecured. How long creditors have after someone dies to file a claim for unpaid debt varies by state. In California, for instance, the statute of limitations begins to run one year after the death of the debtor, as stated in Section 366.2 of the California Code of Civil Procedure. Creditors only have seven months from the time an estate fiduciary is appointed in New York to file a claim against an estate with outstanding debts.

If an estate does not have enough money to pay off credit card bills, creditors may try to seize additional assets, such as joint accounts, from the beneficiaries. Retirement funds, life insurance payouts, assets held in a living trust, securities accounts, and possibly even a home may be safe from creditors’ claims.

Informed Citizenship

Creditors can legitimately contact family members for information when they are unable to collect from you directly, but they cannot force you to pay up your obligation. Creditors cannot threaten or harass the heirs of a deceased debtor to collect on debts for which they are not legally liable under the Fair Debt Collection Practices Act (FDCPA).

You and your loved ones should know the debt collection regulations in your state before giving anything to debt collectors. Everything from using the estate’s assets to pay off debt to the extremely unusual situation where close friends or relatives must pay for funeral expenses out of their own pockets falls under this category.

When asking the estate for payment, credit card firms must always provide a Proof of Claim. If debt collectors try to get in touch with heirs, you may want to hire an attorney to assist you prepare the necessary paperwork, determine what you need to keep for your own records, and choose the best order in which to pay off the obligation. If you and the dead had any joint accounts, you need be especially careful since the beneficiaries named on the accounts could try to take your share of the account’s assets and the death benefits.

Where Does the Present Credit Stand?

Even after a creditor reports a cardholder’s death to one or all three credit agencies, the deceased person’s credit file remains active for identity theft prevention purposes. The deceased person’s credit score is valuable paperwork related to his or her SSN and other assets, even if the credit cards themselves are no longer usable (unless the primary account holder’s name has been moved to an authorized beneficiary). Account assets may also contain accumulated reward points and other incentives.

Rewards Points Transferring

Some credit card rewards points may be transferable or restored to a new account holder following a person’s death, though this varies per rewards program and credit card issuer. Before selecting exactly what to do with the deceased’s account, it is important to check the company’s point transfer policies.

For example, if a credit card account is terminated after death, the points are lost, but American Express will reinstate them to a new account or allow them to be redeemed by the estate. Upon presentation of proof of death, the estate can redeem points from Bank of America, Chase, Citi, and Discover according to their respective policies. No Wells Fargo points or awards will be carried over to a beneficiary after death, and all points will be removed from an inactive account.

If the deceased individual had any travel rewards accounts, such as with a hotel or airline, the executor may be entitled to request that they be transferred or cashed out. Transferring to a beneficiary may be an option, depending on the program and the card issuer’s policies.

While United Airlines would transfer miles to a beneficiary with proof of death, JetBlue’s terms of service state that points are not transferable upon death, but the airline does have a Points Pooling scheme that might be used as a workaround. The program allows up to eight people to pool their scores, so if one person dies, their points can be distributed to as many as seven other people.

You can swap points between hotel loyalty programs such as Hilton Honors, IHG One Rewards, Marriott Bonvoy, and Radisson Rewards. Typically, these plans call for supporting paperwork and have a cutoff date of one year after the principal account holder passes away.

Name your intended beneficiaries for these accounts if you have accumulated a large number of points and believe it would be beneficial to pass them on to your estate or loved ones. This will protect your points from being lost automatically and provide your loved ones quick access to your accounts in case of an emergency.

In conclusion

Learning the ins and outs of postmortem debt is essential for handling the financial affairs of the recently deceased.

Even though it’s not pleasant to think about, it’s a crucial part of being a responsible estate planner and making things easier for your loved ones when you’re gone.

The most kind thing you can do for your heirs is to make sure they have access to all the relevant paperwork and have a plan in place for how your fortune will be divided up. Keep up with your payments, cash in on rewards at least every few months to avoid having a large number of points expire without value, and take steps to safeguard your personal information.

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