Decedent Credit Card Debt
One family’s warm remembrance of their father: “Dad loved to buy chainsaws and car parts.” The fact that their late father lived in a one-bedroom condo with no yard and did not own a car did not factor into his shopping preferences. The next sentence contained the words “credit card debt.”
When a person dies and owes money to creditors it is a good idea to understand how the Estate Process governs these situations. First, not all debts are treated equally. Certain creditors are prioritized in New York State. A third party who paid for the decedent’s reasonable funeral expenses is usually paid first out of estate funds. Estate Administration costs including filings and Court fees follow. The next rung of creditors may include tax authorities. In general, creditors have seven months after the issuance of Letters by Surrogate’s Court to file a claim against an estate for which the Fiduciary (Executor or Administrator) is personally liable. After seven months, estate assets may be distributed to beneficiaries or distributees in good faith if no claims are present. A creditor can still present a claim later than 7 months, but there will be collection difficulties.
There is an understandable desire for family members to want to pay off a loved one’s debts after their passing. The only advice that should be heeded in this situation is “patience.” A clear picture of the estate may take time to develop. Estate assets may take time to gather. A review of possible estate debts may also be necessary to determine validity.
Unsecured credit card debt falls in the lower rung of creditor priority in New York State. Even if a credit card company files a claim against an estate, the fiduciary is obligated to pay other more important debts first. If the remaining estate balance is too low to pay off the credit card debt then there is little recourse for the credit card company. It is because of this estate creditor legal environment that credit card companies will negotiate more readily than other estate creditors. If a fiduciary knows that the estate’s solvency is in question or there are limited estate assets then that fiduciary may want to communicate that fact to the credit card company.
Predatory lending is completely different story. Companies that offer credit or other lending options to an individual who lacks proper capacity is a form of elder abuse. Estate fiduciaries are within their rights to challenge creditor claims that are based on predatory lending schemes. Overspending may be a less than desirable personality trait if there is awareness on the part of the overspender. Where there is a lack of awarenesss then a creditor claim should be scrutinized.
In 2019, touching a small section of glass on a smart phone is the act by which a purchase is made. The simplicity of this motion belies the implications that repeated spending can have on one’s financial life and estate. You can have fun buying things, but know that your family members may have slightly less fun when they have to call the credit card company.
Consulting with the professionals at Sloan and Feller before making estate decisions is an intelligent first step.