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Do beneficiaries inherit credit card debt?

On Behalf of | Feb 4, 2025 | Estate And Probate Administration |

Credit card debt in the United States has reached record highs in recent years. This has caused some people to be cautious, avoiding credit card use as much as possible to prevent overwhelming debt.

But what happens if someone passes away while still carrying a substantial amount of credit card debt? Suppose adult children have been careful about avoiding credit card use, only to find out that their parents passed away with $20,000 in debt. Will those children suddenly inherit the credit card debt along with their parents’ estate?

Paying down the debt

In most cases, the debt still needs to be paid, but that does not mean the beneficiaries will inherit it. Unless they cosigned on the credit card accounts, they are not personally responsible for the debt.

Instead, the estate executor typically pays off the credit card debt along with other obligations such as income tax, property tax and utility payments. It is the executor’s job to handle debts on behalf of the estate after someone passes away.

Because of this, beneficiaries may not receive all of the assets they were expecting. If the executor has to use $20,000 to settle credit card accounts, that is $20,000 that cannot be passed on to the next generation. While this reduces the amount that beneficiaries inherit, it does not mean they are directly responsible for repaying the debt.

Addressing the legal side of estate administration

The estate administration process can be complex, especially when handling debts and other financial obligations. Those involved need to be well aware of all the legal options available to them.