Is an heir liable for her parent's credit card debt?

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 for the expert

Dear To Her Credit,
I have a small question. My father passed away in March 2010. I did not know what loans he had taken from the bank. When I moved to my aunt's home, all of a sudden the bank recovery people found me and started claiming money from me in September 2011. Also, they claimed to not know my dad had passed away. At the bank recovery agent's request, I had submitted his death certificate to the bank. Now they are asking why I did not inform the bank. I said I was not aware of this credit card of his (Dad did not even tell me about it).

Am I in any way liable for my Dad's debt? When he applied for the credit card, no one from the bank contacted me, and Dad did not inform me. Also, as his child and nominee of his bank account, I only got $70,000, while that bank is claiming a debt of $400,000. Am I liable to be prosecuted? If the bank recovery agents come, how shall I handle them? Please help me. I am in deep trouble. -- Reva

Answer for the expert

Dear Reva,
This shouldn't happen to anyone. When someone dies, the executor in charge of the estate searches for all assets and liabilities of the person who died and makes sure everything is settled before distributing money to any heirs. Once you get an inheritance, it should be over.

I asked Long Island, N.Y., elder law attorney David R. Okrent if this kind of thing happens often. He says, "Not to our clients, because we take great effort to make sure we know what's going on. We go back and look at five years' worth of records. We would have seen something -- maybe a title search on properties. Any kind of proceeding that's filed in court is public record."

Executors try to allow plenty of time for creditors to come forward, which is why it takes so long for heirs to get their checks. "We don't usually distribute assets of an estate for nine months," says Okrent. "We usually wait until the tax return is paid and the IRS accepts the return before we distribute assets. You want to make sure there are assets before you pay."

While the estate was being settled, the bank should have noticed it was not getting payments and started an investigation. "If you have half a million dollars that you're owed and a few months go by and you're not paid, you can search the public records to see if someone has died," he says. "Usually you don't have a bank that forgets that they are owed half a million dollars."

The bank cannot hold you liable for your father's $400,000, although in some cases it may go after the executor of the estate. "In New York, executors are responsible to all creditors for seven months," says Okrent. "After seven months, they are not responsible for unknown creditors, assuming everything is done properly."

Unfortunately, the $70,000 you received may not be safe if it turns out the executor of the estate made a grievous mistake by paying you before the estate's debts were settled. "It goes back to the rules of the state," says Okrent. "She might be forced to return the money."

It gets more complicated: "If it's a probate asset, it's generally subject to creditors. If not, it might not be," says Okrent. (Probate assets are owned only by the person who died and then go through the court process called "probate.") "But the assets could still be retrieved by the creditor."

Here's what you should do:

  • Stop letting the bank hassle you by phone. It should file a claim with the fiduciary of the estate instead of hassling you. If bank representatives call, ask them to communicate with you only by mail. If this were easy to resolve by phone, it would be done by now. At least a letter gives you a paper trail so you can prove who said what and when.
  • Hire an estate attorney. You have too much at stake here to go without expert legal advice. An attorney can do some detective work and find out if this debt is even legitimate. If it is, the attorney can best advise you what to do next.

I'm sorry to hear you lost your father. I hope you can resolve this issue quickly so you have one less thing to worry about in this difficult time.

See related: What happens to credit card debt after death?, Can collectors come after your inheritance?, Are you liable for your late spouse's card debt?

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Updated: 01-19-2018