Death and Credit Cards

[mandar13077]

Hello,

I am in need of some advice. I recently lost my dad to cancer and while it was a stressful time I didn't have a lot to worry about. My dad didn't have credit cards and his life insurance policy paid for his funeral expenses. I now worry about my mom and her financial situation, let me state that my parents have been divorced for over 40 years. 

My mom refinanced her house a couple of years ago and recently placed my name on the deed with the county she lives in Florida. She did this so that when she passed away I wouldn't have to pay any kind of taxes. Currently she does not have a will/trusts and doesn't know if she wants to get one. Legal documents are a bit confusing for both of us to be honest. She does have two life insurance policies to pay for her funeral expenses and the other to pay on the mortgage. 

I guess my worry is that once she passes away, will me and my siblings be responsible for any her credit card debt? I know that she has at least 3 cards that she uses regularly and does carry balances on them. While I am the AU on a couple of them, I do not use them for purchases. I do help her keep track of them and make additional payments.

TIA :-)

[Anonymous]

If you are just an AU you are not responsible.

They (Chase) can close the accounts and not even notify you. 

They did this to my wife when her mother dies and even sent her a notice from a collection agency.

Hopefully, this will not happen to you. 

Hope this helps.  

[MySunrise271]

Well someone was just talking about the topic and how it works from Discover. They will try to collect from her estate. If she doesn’t have a will at the time of death the Credit Card company will go to probate court in an attempt to collect. This is still difficult step for them to win and not always successful.  I don’t believe you would personally be responsible but I would google it just to be sure🙂

HTH

[ToughFistFight]

You really need to see an attorney. A firm that is a member of the National Academy of Elder Law Attorneys (NAELA) or a Life Care Planning Law Firm Association (LCPLFA) would be a great start. If you go to sell the house after she passes, you will pay capital gains tax. There are terms that needs to be in the deed that gives her "life use" of the house. Without these terms, things can go sideways. I personally wouldn't take advice from a forum for this extremely important and expensive decision. Save yourself and your mother lots of cash in the end by forking out some cash now.

[Anonymous]

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@MySunrise271 wrote:

They will try to collect from her estate.

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What MPP just said.  The CC debt will only affect you in the sense that you and your mom own property together and also have a joint debt (a mortgage which you are listed on).  Your mom will have assets at the time of her death (her estate) and her debts get paid out of the estate.  Whatever is left over (after funeral costs, paying off cards, etc.) gets distributed to beneficiaries -- at least that's how I understand it.

I see also that ToughFF responded and I agree 100% there as well.  Your mom has entangled you in her finances by placing you on a debt (the mortgage) and the title to the property.  You need an attorney to help sort this out.

If you weren't entangled like that (but there was simply no will, a simple estate, and you wanted to avoid paying an attorney) you might choose to use a resource like Willmaker Plus, which I personally have used for my own situation.  (It also helps you with issues like Power of Attorney, living wills, etc.)  But given the complexity of the situation I think it makes sense to get an attorney.

When a comparatively young person has no will (guy with no kids in his 40s) it's understandable.  When a person who may be dying in the next decade has no will, that's a bad decision.

As TFF says, we are not attorneys and therefore we cannot give legal advice -- just the guesswork of strangers on a blog.

[Anonymous]

You personally are not responsible for her bills/debt. But they can seek restitution from her estate. If she has any savings or equity in the House, and Life Insurance. Everyone can get a piece, depending on who she owes. Some may forgive the debt due to death, while others may not. It's a case by case thing. Now that your name is also on the Deed, you may be responible for that refi loan upon her death though. But since she has Mortgage and Life Insurance, you should be okay.  Even if she decided to go on a shopping spree alter in life, and lost the house to pay for it all. You would still not be responsible, only if you're legally named on any accounts.

[pipeguy]

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@ToughFistFight wrote:
You really need to see an attorney. A firm that is a member of the National Academy of Elder Law Attorneys (NAELA) or a Life Care Planning Law Firm Association (LCPLFA) would be a great start. If you go to sell the house after she passes, you will pay capital gains tax. There are terms that needs to be in the deed that gives her "life use" of the house. Without these terms, things can go sideways. I personally wouldn't take advice from a forum for this extremely important and expensive decision. Save yourself and your mother lots of cash in the end by forking out some cash now.

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With all due respect, and having settled 3 "parents" estate, Capital Gains tax IS NOT charged on an estate nor is "deed" a place to start messing with "use restriction clauses" (IMO).  

#1 An Authorized User is NOT responsible for a credit card balance should the card holder die.

#2: life insurance policies are exempt from probate as a rule

#3 Being added as a co-owner of the property makes you co-responsible for obligations of an owner, such as real estate taxes - however, should you be the sole "co-owner" the property would become yours upon the death of the other owner (if there are 3 deeded owners and one dies equal shares go to the remaining owners).

A good estate planning move is to place (add) a child or heir to one's no-mortgage real estate because the real estate avoids probate and taxes but doing so can limit naming that asset in a will since in passing the original property owner and their estate loses their claim to the property upon death (it transfers to the remaining owner(s)).

#4: Being added to a mortgage obligation on a property is different than being added as a deeded co-owner, one you have an obligation to continue to pay the mortgage, the other you don't. In addition, if there is a balance on an open mortgage that goes into probate then it all becomes more difficult legal-wise. With an open mortgage, the estate will in most cases sell the property and distribute any net profit to the heirs (proceeds become an asset to the estate) - with a surviving co-owner the proceeds go to you after the estate settles just that asset's obligations (taxes, HOA fees, closing costs, loan balance, etc).  

Add: I'm assuming here that the estate/property fall below "high value" assets which have limits on non-taxed gifts and estates ( without being real specific its $5 millon+).

Add#2: Although there are federal laws/regulations concerning inheritance and "gift" limitations, most probate law is State-based and will vary by the state. Estate planning is not that difficult for most people (excluding very high income) and the VERY best time to get your ducks in a row are when everyone is alive and in sound mind - believe me I know this from experience - at the very least have your mother establish a "will" naming an executor (estate administrator) and a basic priority for distribution of any assets.  

[pipeguy]

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@MySunrise271 wrote:

Well someone was just talking about the topic and how it works from Discover. They will try to collect from her estate. If she doesn’t have a will at the time of death the Credit Card company will go to probate court in an attempt to collect. This is still difficult step for them to win and not always successful.  I don’t believe you would personally be responsible but I would google it just to be sure🙂

HTH

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The Probate process is pretty specific as to who and how claimants are prioritized and or paid. In general, an estate publishes the existence of the estate/probate in a "local paper" and typically this is small generic in-small-print type local paper - it's NOT by any means a direct notice "calling all lenders-heads up".

There is a specific period (90 days - that varies by state I'm sure, but mine were 90 days) in which a creditor can file a claim against the estate, but that does not assure it will be paid by the estate. Funeral expenses, surviving spouse, medical bills, legal fees, estate "costs" filing fees, et all have a specific priority or ranking as to who gets paid first or at all. Credit Card companies are unsecured debt and generally are a low priority within the process and generally don't bother to file a claim during the filing period - not saying they can't but usually its just a write off (I suppose there is a difference between a $3000 balance and a $50,000 balance but it's still a claim for unsecured debt).  

[mandar13077]

Thanks everyone. I feel a little better about the situation. I am going to have a conversation with my mom about getting her legal affairs in order sooner rather than later.

[MySunrise271]

I’m not sure of the complete process , however in whatever process deemed most efficient, Discover will try to collect from the estate. Indeed I’m sure the cost of those actions are in perspective to the payoff.