Can You Inherit Credit Card Debt?

Can You Inherit Credit Card Debt?
BY Tammi Huang
Oct 24, 2013
Key Takeaways:
  • You can inherit credit card debt when someone dies if you co-signed on the account.
  • Credit card debt may come out of the estate, depending on local laws and the size of the inheritance.
  • You can get into trouble using a dead person's credit cards.

“When a parent passes away, can you inherit credit card debt?”

Although not a pleasant subject to think about, whether you can inherit credit card debt from your deceased parents is a question that some people may have on their minds. There isn’t a simple yes or no answer, but depending on the jurisdiction you live in, you may not be responsible for your parents’ debt (at least not directly).

The following is a brief overview of how individuals’ debts are handled after their death, and specifically whether their surviving children have any responsibility for paying them off.

Credit card debt and estate law

While such questions can only be answered by a licensed attorney in your jurisdiction, when someone passes away, the executor generally turns to the person’s estate first to pay off any remaining credit card balances and other debts. If the deceased person has more debts than they have assets, the creditors may be out of luck and will likely have to take a loss. Still, that doesn’t mean that your parents’ debts won’t affect you.

If you are a beneficiary, debts are often dealt with first before any inheritance is distributed. For example, some jurisdictions require that payments be made in this order:

  1. Secured debts (i.e. mortgage, car loans)

  2. Unsecured debts (i.e. credit card debt)

  3. Inheritances as defined by a will

Aside from that, there may still be situations in which you can be left responsible for your loved one’s debt. Here are some examples:

Being a co-signer or joint card holder

If you co-signed for a credit card and/or are a joint card holder, can you inherit credit card debt? Actually, yes. Parents often co-sign with children who are just starting out (to help them learn about finance), and adult children sometimes co-sign for elderly parents to help them keep track of their expenses. It’s important that you always keep tabs on your credit report and try to make sure any financial issues are resolved before a traumatic event occurs.

Using a card after the card holder’s passing

If you continue to use a credit card as an authorized user after the cardholder passes away, that could be a big problem. It can look as though you are spending someone else’s money with the intention of not paying it back. The same goes for using a card when you know the card holder is near death and doesn’t have enough money in their estate. You could be accused of fraud, especially if you knew that the debt would not be repaid.

The death of a parent can sometimes mean financial turmoil for surviving relatives, but just as in any money situation, addressing it upfront will save you a great deal of stress down the road. Generational debt has the potential to get messy. It’s best to consult with an attorney who can look at your situation and help you decide what your next steps should be.

Improve your financial health and pass it down to the next generation

So, can you inherit credit card debt? It depends, but there are steps you can take to avoid that outcome for your own children. Learning how to deal with debt, money, and planning for your future doesn’t need to be hard. Our simple-to-follow guide to help you find the tools you need to move to a better financial future. Get started by downloading our free guide right now.

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