Do Authorized Users Inherit Credit Card Debt?

If you've just lost a loved one, sorting out their credit card debt probably isn't high on your list of priorities. But if you're an authorized user on their card, you might be wondering what happens to that debt -- and who's responsible for it.

Here's what to know about credit card debt when you pass away, and how it's sorted out.

Outstanding debt is paid by the estate (not authorized users)

In most cases, authorized users -- or family members in general -- are not responsible for credit card debt when someone passes. Instead, the debt is covered by the person's estate, with the remaining assets being passed on to heirs.

If someone dies with $20,000 in credit card debt, for example, but has $100,000 in assets, the estate executor would cover the debt, then pass the remaining $80,000 on to beneficiaries.

There are a few exceptions. You may be held responsible for outstanding debt if:

• The account was jointly owned, or you cosigned the application
• You're a surviving spouse living in a community property state: AZ, CA, ID, LA, NV, NM, TX, WA, or WI

Other than that, though, debt will be paid for by an estate -- or might even go unpaid if it can't be covered.

You'll have to stop using the card, though

Here's the downside: Authorized users aren't allowed to keep using a card after the primary cardholder dies. If you keep using a credit card after the accountholder dies, you could even be charged with fraud.

Also, keep in mind that until someone notifies the issuer, a credit card account will stay open. That means payments will still be due, recurring charges can still hit your account, and late fees and interest can pile up.

For this reason, I recommend always keeping some credit cards in your own name. That way you won't have to worry about immediately finding a new card if the worst happens.

Want to find a credit card that fits your spending habits and lifestyle? Check out our list of the best credit cards available now to get started.

What about credit card rewards?

You might be wondering about the flip side of debt: credit card rewards that went unused. The short answer is that it depends on the issuer, but your rewards could be:

• Transferred to a surviving account holder
• Transferred to a surviving spouse
• Transferred to an estate trustee
• Forfeited if the account is closed

For you, it might be worth reading the fine print to learn what happens to your rewards. In general, though, it doesn't hurt to regularly use your rewards as you earn them -- stockpiling doesn't do anyone much good.

How you can prepare today

Want to get a jump on your financial afterlife? Here's a list of things you can do:

• Keep a list of all your cards to give to your family and estate executor
• Provide instructions for closing your accounts in estate documents
• Offer guidance on how to use or transfer rewards
• Tell authorized users to stop using your cards ASAP

If you do all the above -- and have your loved ones do the same -- you should have one less thing to worry about when the time comes.