Deceased Account Holders and Credit Card Fees
Fees on a deceased account may be a concern when a relative has passed away. We might assume any business transactions disappear when someone dies but our estate exists even after we are gone.
A credit card is an individual and unsecured debt. When the account holder is living, the lender cannot hold anyone else accountable for that debt. Only the person who was granted the credit card can be pursued for payment.
This doesn’t change with the death of the account holder. Deceased account holders cannot be assessed against the heirs of the person. However, this may not be the case if there are other authorized users of that credit card.
Most banks allow you to add an authorized user to your credit card without vetting that new user. You are responsible for charges made against the account if you are the primary account holder.
A few lenders do have stipulations that transfer responsibility for payment to other users in the even of the death of the primary account holder.
Fees and Debt May Not be Passed On
If your husband has a credit card in his name only and there is a balance on that account when he dies, you cannot be held responsible for credit card fees on the deceased account or for the balance of the debt.
This might not be the case if you were listed as an authorized user of the account. Debts are contractual obligations and some banks use terms that bind any user of a credit card to obligation for the debt incurred on that account.
Fees on deceased accounts may continue to be added to the account on paper but fees added after death will not be enforced as an amount due. That does not mean the credit debt disappears on the death of the person who was responsible for payment.
Estate, Probate and Payment
Your estate survives after you are gone. All assets you own and debts you owe become part of that estate upon your death. It is the obligation of your estate to pay what you owe to limit there are funds in the estate to cover debt repayment.
For someone who is well off financially, all of the debts that were owed at the time of death will be paid out of the estate. In many cases, there are not sufficient funds left in the estate to pay all of the debts of the deceased.
Each state has requirements that outline the order in which outstanding debts are paid from the estate of a deceased person. Disbursing funds from the estate is known as probate and may include money left to heirs in the payout process.
The priority of payments is critical as once the estate has been depleted, any creditors remaining will not be paid. First in the order of payment is usually the burial and funeral costs followed by medical expenses incurred during the person’s final illness.
Probate fees and taxes are next in line and these are paid out of the estate funds before any debts are repaid.
Debt repayment by Estate
Fees on a deceased account are not one of the priority obligations when debt is being repaid from an estate. After the expenses listed above are taken care of the claim of credit lenders with unsecured debt are then considered.
The state laws dictate the order in which unsecured debt is paid with funds from the estate. If there are enough funds to pay all credit card fees on decrease accounts, lenders are satisfied and any funds remaining are divided among the beneficiaries of the estate.
If there are not enough funds, the estate is deemed “insolvent”. All of the money in the estate will be paid out according to the priority payout established by the state laws. When the money has been depleted, creditors remaining will not be paid.
State laws determine the schedule of payouts from a decease person’s estate to creditors who are holding debt incurred by that person. Payouts are made according to established guidelines and unsecured credit card debt is at the bottom of the list of debts to be repaid.
If there is sufficient money to cover all of the deceased’s debt, all creditors are satisfied. If the estate is insolvent, some debts will not be paid at all.
Credit card lenders cannot pursue survivors or next of kin for fees on deceased accounts or for the debt charged to those credit cards.