Managing Loved One's Finances After Death
People often ask if they’re responsible for a loved one’s debts after death. In most cases, the answer is no, but not always. Would you know how to manage a family member’s accounts after death? There’s actually quite a bit to it. One of the first things you may be surprised to learn is that when someone passes away, their credit reports aren’t frozen or closed automatically. The estate’s executor or personal representative will have to do that. And it’s very important to close credit reports as the deceased could still be the victim of identity theft. And it may even be more likely after death. So you need to have a death notice placed on the deceased's credit reports. Often, the surviving spouse will be the executor or personal representative, but even when that’s not the case, the surviving spouse needs to work with the executor to make sure the right steps are taken to manage the deceased’s accounts. First you should know that if your loved one died with debt, the estate is responsible for it. If the estate lacks the funds to repay it, no one else is obligated to pay it usually. There are a few exceptions: (1) If you co-signed a credit card or other type of credit account with the deceased, that account is also in your name and you’re legally obligated to repay the debt. Also, (2) if you had a joint credit account with the deceased meaning, it’s in both your names you’re obligated to repay. But you’re not obligated if you’re only listed as an authorized user. Now, all of that goes out the window if you live in a community property state where you’ll generally be required to repay some or all of your deceased loved one’s debts. (3) And one more instance where the surviving spouse might be responsible for the deceased spouse’s debt: where state law requires you to repay certain types of debt, such as medical expenses or debts related to a jointly owned home. Of course, if the deceased’s estate has the funds to repay his or her debts, you shouldn’t stand in the way of that but rather facilitate it however you can. Proverbs 3:27 says "Do not withhold good from those to whom it is due, when it is in your power to act." Even in cases where you’re not obligated to repay a loved one’s debts, you may feel responsible for it. If you feel God leading you in that direction and you have the funds to repay a debt, by all means do so, after careful consideration and prayer. Also, you may be contacted by debt collectors concerning your loved one’s outstanding accounts. If that happens, first confirm that the debt is actually owed. Then, if the estate has the funds, you can repay the debt (make sure you get a receipt) or you can refer the collector to the probate court overseeing execution of the will. Either way, the estate will be responsible for the debt. If you continue to be harassed by debt collectors, you can block debt collectors from contacting you by sending a letter demanding they stop contacting you. If collectors continue, they’re in violation of federal law and you can report them to the Federal Trade Commission at FTC.gov. However, keep in mind that this won’t eliminate debt that’s legitimately owed. Earlier, I mentioned that credit reports aren’t automatically closed when a person dies. The executor or personal representative (often the surviving spouse) has to make that happen by notifying the credit bureaus, Equifax, TransUnion and Experian. They will then seal those reports and place a death notice on them. There are three steps to notifying a credit bureau about a loved one’s death: (1) Contact the bureau to find out what documentation you’ll need to submit. Generally this is the deceased’s legal name, Social Security number, date of birth and death, a copy of the death certificate and other legal documents. (2) Once you’ve gathered those papers, submit them to the credit bureau. Make sure to keep copies for yourself. The bureau will then freeze the deceased’s credit and prevent anyone from opening new accounts. Also, the bureau you contact will automatically notify the other two, so you only have to do this process once. (3) Finally, you’ll want to review the deceased's credit reports so you’re sure about all open accounts with creditors and lenders. You’ll want to do that with all three credit bureaus because they might not all list every account. So now you know what’s needed to manage a loved one’s credit accounts after death. If you’re ever in that situation and need help, you can find a godly estate attorney to assist you by visiting MoneyWise.org and clicking on Find a CKA. 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