Have you thought about how your credit card debt might affect your loved ones after you are gone? Outstanding debts owed by the deceased can often be attached to an estate or trust if a creditor chooses to file a lawsuit against a decedent. A court judgment could drain the inheritance you leave your spouse or children if such a suit is filed in court. You can plan ahead for such eventualities, however, by retaining a real estate attorney and taking precautionary legal measures.
Obligation to assume your credit card debt could fall on a surviving spouse or other loved one if they are a signatory on the creditor agreement. Being a signatory means they have already legally agreed to be held liable for your credit card debt once you have passed away. If your spouse, adult child, or other co-signing family member has ever been participatory as a signatory in a credit agreement under your name, they would have the obligation to pay off any outstanding debts owed on the account after your death. This is most common with credit card account that are joint, when both users sign that they are responsible for debt accrued. However, a merely “authorized user” of your credit card account may not necessarily be liable for paying off the balance, as long as they immediately cease use of the card after your passing. Making sure all creditor agreements have only your name on them as a signatory and that authorized users are informed of their rights and responsibilities regarding use of your account can help keep credit card debt from surviving you.
Most Common Probate Court Triggers
Since federal law allows for debts to be recovered from your estate under certain conditions, avoiding probate liquidation of assets is a priority. The top reason for an estate or trust to be reviewed by the probate court is for purposes of debt collection. Credit card debt can trigger a probate review if the above advice about signatories and discontinuation of charges after your death are not followed. If your will goes into probate, any qualifying property, savings accounts, or other easily liquidated financial assets that can attached to pay off your creditors. This can substantially reduce the inheritance you are trying to leave to your loved ones.
Protecting your Estate against Credit Card Debt
There are legal protections that your attorney can use to help you shield your assets so your wishes regarding your estate are carried out after your death. Third-party debt collectors can be blocked form gaining access to financial information regarding your estate or trust, and key estate assets such as managed retirement or benefit plans can be excluded from potential attachment of assets to pay of a decedent’s creditors. In addition, New York law exempts most trusts from enforcement of money judgements. If you want to help safeguard your loved ones’ inheritance, you may wish to speak to a qualified Staten Island estate planning attorney about setting up a trust and protecting your assets.