The deceased’s estate generally pays off any outstanding debts and taxes. As noted by Credit.com, the estate may remain liable as creditors attempt to recover remaining balances from its assets or from a joint account owner. Payments for jointly owned debts, such as for mortgages or credit cards, automatically become the responsibility of the surviving account owner.
An authorized user or individual added to the deceased’s credit card account, however, may not have liability for the balance. The card’s issuer typically closes the account when learning about the owner’s death. If an authorized user continues to make purchases with the card, the financial institution may flag it as fraudulent activity.
Debts without a joint owner or an authorized user
As described by Experian.com, the assets of an estate may go toward paying any remaining balances on the deceased’s credit cards. The estate’s executor has responsibility for contacting the deceased’s creditors and informing them of the death.
By negotiating with creditors, an executor settles outstanding debts before distributing assets to heirs. When the amount of debt exceeds the estate’s assets, creditors may view the estate as insolvent. Certain creditors may also forgive the remaining balances.
Estate plans may include instructions regarding creditors
When preparing an estate plan, an individual may wish to name an executor who has experience managing debts. Because the estate’s chosen representative may need to deal with a range of creditors and account types, documented instructions may also prove helpful.
An individual may provide the executor with copies of his or her credit card account statements ahead of time. Knowing which companies to contact as soon as the individual passes away may help prevent a lengthy probate process.