Death and Debt
The death of a spouse is heartbreaking and something that no one really wants to think about. Unfortunately, it is something that needs to be considered and a plan put in place to ease the major adjustment in one’s life. The surviving spouse faces more than just overwhelming emotions — he or she may also face the challenge of handling a loved one’s outstanding debts.
Here are some interesting (if not alarming) statistics to put things in perspective:
The average life expectancy for women is 81 years, compared to 73 years for men, which makes it extremely clear that the odds of a woman having to deal with her late husband’s financial obligations are far higher than the reverse.
The average age of widowhood is 55 years old, according to the U.S. Census Bureau. This raises another obvious challenge of a woman potentially having to deal with finances on her own, some 10 years before the average age of retirement.
Credit Card Debt
With a joint account (in other words, both spouses' names are on the account), the debt is considered to be that of the surviving spouse, who is then responsible for settling any outstanding balance along with (or instead of) the deceased’s estate. Moving forward, the surviving spouse can either close the account or re-title it in his or her name.
In situations where the surviving spouse is merely an authorized user (in other words, a “second cardholder”), the debt is considered to be that of the deceased, and the surviving spouse is generally not responsible for payment. In this case, the deceased's estate may be liable for settling the debt.
Ultimately, any debts that the surviving spouse is not responsible for are paid by the deceased's estate. The person designated to settle the estate (the executor) pays off the debt using whatever assets are in the estate. Note that in the case of debts that are solely those of the deceased spouse, creditors cannot demand more than the value of the estate. For example, if the credit card debt is $10,000 but there is only $2,000 left in the estate, the credit card company may have to write off the remainder.
Identity and Security
To keep identity thieves from taking undue advantage of the open credit file of a deceased loved one, it’s advisable to immediately alert credit-reporting agencies of the death. Add a "deceased notice" and a "Do not issue credit" statement to the file. Any other creditors (auto loans, banks, etc.) should also be notified of the death. They will likely require certified copies of the death certificate.
The time following a loved one’s death can be overwhelming. Many people have never had to deal with the complexities of settling with creditors and closing accounts before. But there are some protections during this trying time.
For instance, the Credit Card Act of 2009 prohibits credit card issuers from charging late fees or annual fees while the estate is being settled. Likewise, Federal Trade Commission guidelines limit the practices debt collectors can employ when trying to get money from the deceased’s relatives.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC
Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com
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