Who's responsible for a deceased spouse's card debt?

It depends on state law, the estate and your account status

By Alan Klayman

Maturing Loans

Alan Klayman, creator of MyIncomeStrategy.com, is CEO of Klayman Financial LLC. He served as a vice president at Fidelity Investments, worked as a financial planner for American Express, and built fixed income strategies on Wall Street at The First Boston Corporation. At CreditCards.com, he writes Maturing Loans, a weekly feature in which he answers readers' questions about retirement and debt issues.

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Dear Maturing Loans,
My husband of many years recently passed away. He had a credit card with Chase with a sizeable balance that I was only an authorized user on. There is no estate, he was chronically ill and I had only a small life insurance policy through my employer. The credit card company collection people keep calling even though I have sent a letter telling them, "no estate," "no credit life" and they are aware I was only an authorized user and don't intend to pay the debt. I also asked that they quit calling me and send correspondence only through mail, but they continue to call me and have placed one call to my son to ask me to call them. I (we) live in Indiana. My credit report shows this account closed with me as only an authorized user. What should be my next step to have them stop calling me? Do you agree I do not owe this debt? -- Jane

Dear Jane,
Settling a debt after death is sometimes a longer process than you would like to endure. Every state has laws that may vary, and each state treats federal law the same. Federal law covers accounts that fall under the Employment Retirement Income Security Act (ERISA), such as employer sponsored plans, 401(k)s (self-directed plans), 403(b)s (teachers and non-profit plans), and company sponsored defined benefit plans (traditional pensions).

Accounts that fall out of federal law usually are covered under state law and every state is different. In community property states, depending on the laws in that state, your debts are shared. In non-community property states, like Indiana, debts are held like assets. They are categorized by ownership. Keep in mind that individual state laws might treat each of these situations slightly differently. Joint accounts are passed upon death from one person (or entity) to another. So things like joint savings accounts, joint brokerage accounts and joint credit cards share ownership and responsibility.

In your case, however, since you were just an authorized user on the account, you personally are not liable for the debt, unless you are also the estate's executor. You should not allow the harassment to continue, and if it doesn't stop, you will most likely need to hire an attorney to intervene on your behalf. If you cannot afford an attorney, you should contact a local, nonprofit credit counseling service to help. You do have rights under the Fair Debt Collections Practices Act. CreditCards.com has published some sample letters to send to collection agencies as well as articles on how to deal with deal with collectors and what happens to debt after death.

Your husband's individual accounts are just that, they are individual. They do not pass by way of ownership. They pass by instructions in his will. Any other type of account where there is a beneficiary also passes by way of the specific instructions of that account. Think of an IRA or an annuity contract, or the classic example is a life insurance policy.

Life insurance policies usually pay out to the beneficiary upon the death of the insured. That money is in the taxable estate of whoever is named the owner of the policy. Ownership is key in these situations. When there are no specific account instructions or a beneficiary or joint ownership, then the assets of the estate pass through the probate process. Probate is the court process of validating your will. If your husband did not have a will, then he is said to have died 'intestate,' which means that he did not have a will. Transfers of assets and debt are based on a state mandated document.

Based on all of this information, where does your situation fit in? Again, if you were not a joint account owner and only an authorized user, then this is the debt of the estate and not yours. However, the personal representative (sometimes called an executor) of the estate is responsible for paying the bills, settling debts, and then distributing assets after your husband passed away. If that was you, you must be sure you did it correctly and followed your state guidelines. If you were the personal representative and are unsure that you dotted every line and crossed every 't,' then my suggestion would be to see an estate attorney. Estate attorneys typically will have an 'LLM' following their name (Masters of Taxation and Law). If everything in the estate was done correctly, and it seems that you are doing what you should by contacting the credit card company, sending them letters, asking them to stop calling, then you should seek legal counsel and have them draft a letter on their letterhead for you. This should stop collection calls.

Thanks for the question, see you back here next week.

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Alan Klayman is creator of MyIncomeStrategy.com and CEO of Klayman Financial LLC. Klayman specializes in retirement income planning, business management and planning, estate planning, tax-advantaged investing, trust investment management, professional money management, insurance and annuities, mutual funds, fixed income securities, and institutional and personal retirement plan administration.