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Estate administration and credit card debt

If you were appointed the executor of the estate of a recently deceased loved one, there is a very good chance that you will be instructed in the will to pay off any outstanding debts before distributing assets among heirs.

One outstanding debt that people commonly end up leaving when they pass is credit card debt. While heirs are not required to pay any amount of money to cover these types of bills, the story may be somewhat different for executors, who can find themselves facing some degree of financial responsibility if they breach their fiduciary duty.

Specifically, experts indicate that executors must not only follow the instructions set forth in the deceased’s will, but must also abide by state/federal guidelines setting forth the order in which creditors must be paid and the amount of effort otherwise required to notify potential creditors.

Similarly, they must also abide by what is known as the creditor period, a timeframe in which payment cannot be distributed to heirs.

Failure to abide by these guidelines — meaning immediately distributing assets to heirs without giving any consideration to creditors whatsoever — can constitute a breach of fiduciary duty and leave the executor responsible for any credit card bills that emerge further down the line.

In order to prevent any such problems, experts advise executors to do everything in their power to track down all credit cards and cancel them immediately. Outside of looking in wallets, purses and drawers, they advise taking such steps as having mail forwarded, checking the deceased’s email periodically and securing a free copy of the deceased’s credit report from one of the three credit reporting agencies.

In the event a credit card is missed and a bill emerges at a later point in time, experts urge executors to consider negotiating the balance with the lender, as there is a very good chance they would be willing to reduce the balance in order to resolve the debt.

All of this serves to underscore that estate administration can sometimes prove to be far more difficult than people envision. In these scenarios, an executor should strongly consider speaking with an experienced legal professional who can guide them through the entire process, and ensure that both the law is followed and the wishes of the deceased are honored.

Source: Forbes, “How to cope with credit card bills after a family member dies,” Deborah Jacobs, June 18, 2014