Deceased mom's debts take priority over inheritance

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My mom passed a little over a year ago. I am an only child and the executor of her will that was recently probated.

I am finally able to get into my mom’s house, and now I’ve discovered that she had some credit card bills. Of course, they are now way past due. These companies seemingly do not know that mom has died. The cards have all gone to collection agencies.

Do I need to seek out these debt collectors? Can I negotiate? Do they really even need to be paid at this point...what if I do nothing?

My mom had a very small estate and if I pay off these cards, then there will be no money in estate to pay out to grandchildren (beneficiaries). Please advise ... big thanks – Sondra


Dear Sondra,
Having gone through the process of taking care of a parent’s estate myself, I know how difficult it can be to find information about how to do it properly.

I would attribute most of the difficulties to two things. First, estate settlement laws vary by state. You must follow the laws of the state in which the deceased person lived, and that may not be where you live. Second, there is an assumption you will use a lawyer to deal with an estate. This is often not necessary or practical, especially with a small, uncontested estate.

If you want to settle the estate yourself without getting a lawyer, your best bet is to look for help on your state website. You can probably file a small estate affidavit for your mom, instead of going through formal probate. The state website should tell you what the asset limit and other requirements are for a small estate affidavit.

You will need to contact all your mom’s creditors and tell them that she has passed away. Call the phone numbers on the bills and ask them what to do. They generally require a death certificate as proof of her passing. Some will require a certified death certificate, which you get from the county.

Because your mom’s credit card accounts have been sent to collections, the balances may be greatly increased by late fees and interest charges. The Credit CARD Act of 2009 limits the amounts creditors can charge you while you are settling an estate. Hopefully, by the time excess charges are removed from your mother’s accounts, they are of a more manageable size.

When you have a list of all your mother’s debts, you must disburse her money exactly as required by state law. Generally, you pay funeral and final expenses first. Pay high priority debts next, such as taxes. Further down the list are unsecured debts, such as credit card balances. If there is not enough money to pay all the debts, the highest priority debts get paid, and the lower priority debts may get paid in part or not at all.

After a person has died, it’s too late for credit card debt negotiation. Instead, the estate must be handled according to law. The bank is going to get its fair share – no more, no less.

I’m sorry to say, but if there is no money left after the credit card balances are paid, the beneficiaries will not receive an inheritance. Creditors must be paid first. I often hear people say that it’s a shame for money to go “just” to pay credit card bills. But the money was spent when your mom used her cards. For all practical purposes, it’s already gone. If you do nothing about the credit card bills and just disburse money to beneficiaries anyway, as the executor you could be held responsible for the debts.

If you disburse all your mom’s estate and there are still bills unpaid, you are not responsible for them. Do not pay them with your own money.

It’s sad that the grandchildren probably won’t receive a financial inheritance from Grandma. It’s often the case, by the time grandparents go through the last stages of life and everything is settled. There are still household items and photos you can give them to help them remember her.

If you are still unsure how to deal with your mother’s estate, or if it becomes more complex, don’t hesitate to seek qualified legal advice. You may be able to find low-cost or free legal service, if necessary, in her state.

See related: What happens to credit card debt after death, Notify card issuer immediately if accountholder has died

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Updated: 01-22-2018