By far, the saddest cases in my years as a financial advisor were assisting widows after their spouses' deaths. Not only does a surviving spouse have a great deal to manage emotionally, but the financial burden can feel equally overwhelming.
Later in this article we'll take a look at who's responsible for a late spouse's credit card debt, but let's first address three important financial actions to take soon after the death of a spouse.
1. Alert credit agencies: Unfortunately, these days, the open, abandoned credit file of a deceased person is like a hand-engraved invitation for identity theft. So, the first step you should take in dealing with the deceased's finances is to alert the three major credit-reporting agencies -- Experian, Equifax, and TransUnion -- of the death. Experts at LowCards.com also advise you to request that a "deceased notice" and the explicit statement "Do not issue credit" be added to the decedent's file. To further protect your deceased spouse's identity, LowCards.com recommends you ask to be alerted if any new credit applications are made in your spouse's name. Make the requests in writing and include a certified copy of the death certificate. Keep copies of the letters for your records and send via certified mail.
2. Request a credit report: Get a copy of your spouse's credit report mailed to you. That way, you'll have a complete and up-to-date record of your spouse's open credit cards.
3. Contact creditors: Call the decedent's creditors to notify them of the death. They too will need copies of the death certificate mailed to them.
And the Bills Go To ... Whom?
Who is responsible for the outstanding credit card debt will depend on the type of account and where the deceased lived. Let's take a look at the specifics.
Joint account: If the account had both spouses' names on it, then the surviving spouse is responsible for any outstanding balance. In this case, the debts of the deceased are considered those of the surviving spouse. The surviving spouse can either close the account or have it titled in his or her name only.
Authorized users and second cardholders: A surviving spouse who was an authorized user or second cardholder is generally not responsible for payment on the credit card. The debts are considered those of the deceased only and are to be settled through the deceased's estate (a bit more on this later).
Individual account: Here's where it gets tricky. If the card was solely in your spouse's name, you are not personally responsible for the payment. However, assets and debts accrued during marriage are considered joint property in community-property states. So if you live in one of the 10 states where community property laws may apply -- Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin -- you could end up being responsible for the credit card debt. Check your state laws for more details.
When the Deceased's Estate Pays
If the surviving spouse isn't responsible for the debts, then they're paid from the deceased's estate. Assuming there are assets in the estate, then the executor -- the person in charge of handling the estate -- pays off the debt. If there aren't enough assets in the estate, the credit card company typically writes off the debt as a loss and the credit card is closed. For example, if the estate value totals $2,000 and the credit card debt is $10,000, the credit card company can't ask for more than what the estate is worth.
Here are a few more important tips:
Know your rights. According to the Credit Card Act of 2009, when an executor requests a credit card balance, the issuer is required to provide it within 30 days. Also, the issuer can't charge late fees or annual fees while the estate is being settled. And new Federal Trade Commission guidelines limit aggressive tactics for debt collectors trying to get money from the decedent's relatives.
Get more help if you need it. Go to Nolo.com for free legal information. Or contact an estate-planning attorney if you need further assistance. They can help guide you through the process. You can search for attorneys in your area using the American Bar Association's website.