Estate Planning & Credit Card Debt

As you continue on your estate planning journey, it’s important to ensure you don’t forget to plan for and include all your assets…and, yes, debts. Debt is a part of life; most people will incur debt at some point and may still hold unpaid debt when they pass away. For many Americans, at least some of that debt will be credit card debt.

Credit card debt is a part of life, so it should be something you think about when crafting your estate plan. If you are someone who regularly holds a balance on their credit card (i.e. you don’t pay off your credit card in full every month) you should come to terms with the fact that your spouse or estate will be responsible for paying off that credit card bill after you pass away.

I’m Estate Planning Attorney Paul Margerie. At Margie Law, I help people in Wauwatosa, Brookfield, Elm Grove, Milwaukee, and surrounding communities craft custom estate plans to protect what’s most important to them. For questions about how credit card debt should factor into your estate plan, read on. For more questions or to get started creating a will, trust, or power of attorney, contact Margerie Law today.

Credit Card Debt & Wisconsin Law

In Wisconsin, credit card debt is handled slightly differently when it comes to estate planning  than in many other states. Wisconsin is what’s known as a “community property” or “marital property” state. That means any assets obtained or debts incurred during a marriage — including credit card debt — are the jointly-held responsibility of both spouses. There is some nuance here, however. If the credit card is only held in the name of one spouse, the debt held on that card may not automatically revert to the surviving spouse. More on this below.

Settling an Estate with Credit Card Debt

Unfortunately, when you pass away, your credit card debt will not magically disappear. If yours was the only name on the account, your credit card debt must be settled out of your estate. The executor of your estate should first notify your creditors of your passing, take a full inventory of all your assets, determine the total value of your assets, determine if the credit card debt is valid, then move forward paying it down. No executor should automatically pay the debt before taking these crucial steps. If you are an executor and have questions about how to handle credit card debt, talk to the lawyer associated with the deceased’s estate plan or contact me, Milwaukee Estate Planning Lawyer Paul Margerie of Margerie Law.

If the total amount of credit card debt exceeds the total value of your estate, the balance that remains after your estate has paid all that it can pay will be forgiven. If a credit card company tries to go after a spouse or family member to pay the balance of the debt, they should contact a lawyer immediately.

An important caveat to this rule: insurance proceeds, 401(k)s and 403(b)s, and IRA accounts are usually not considered assets that can be used to pay off credit card debt. These accounts will go straight to their beneficiaries without being counted in the total value of assets that can be used to pay down debt.

If the credit card was jointly held with another person (like your spouse), the credit card debt becomes their responsibility.

What You Can Do Now

As with anything involving your estate plan, the more detailed and conscientious you can be in organizing how your credit card debt should be handled after your death, the better. The best thing you can do to relieve the stress your family will feel after your passing is to pay down your credit card debt as much as you can. However, this is not always possible. What everyone can do is keep thorough documentation of all credit card accounts and debts. This can be as simple as a word document that contains credit card account numbers, usernames and passwords to access those accounts, contact information for the bank or credit card company that hosts the account, and any other relevant details. Store this information in a safe place where it cannot be accessed by anyone with malicious intent, such as with your estate planning lawyer or the person you have entrusted as the executor of your estate.

When it comes to estate planning, credit card debt should be considered and planned for alongside all your other assets. An experienced Milwaukee estate planning attorney like me, Paul Margerie, can help you navigate this thought process and understand your options. To get all your estate planning questions answered, give Margerie Law a call today.