In the recent past, millions of Americans could enter retirement not just owning their own homes, but doing so without the burden of serious debts. For many seniors, the long term impact of recent economic turmoil has changed that. According to data from the Federal Reserve, average senior debt is up 83% since 2001, placing the average debt-holder more than $50,000 under.
Like you might expect, no small part of that debt is made up in mortgages. Many people took the easily available credit of the last decade to borrow big against their homes. Following the real estate bubble burst, those big loans have become a lifelong burden. But mortgages are only half the picture. An increasingly larger amount of senior debt originates from credit card charges — and the reason why may surprise you.
Credit Card Debt for the Elderly
When you think of credit card debt, you probably find yourself imagining the irresponsible or impulsive purchase of luxury goods, but elderly debt associated with plastic purchasing power usually looks nothing like that. Many of the seniors who have recently undertaken large amounts of credit card debt did so only to survive.
Facing the potential of bankruptcy, the need for expensive medications, devalued real estate, and a volatile stock market, many seniors have been forced to rely on plastic just to get ahold of essentials. In fact, research shows that 75% of seniors with credit card debt are using their cards to pay for their basic needs, such as food, prescriptions they need to manage their health, paying rent or mortgages, utility bills, and even insurance.
When a loved one with a large debt dies, who’s responsible for paying the debt? In most cases, family members aren’t responsible – but there are exceptions. For example, if you’re the joint owner of a credit card account, then you’re obligated to pay debt on that account even if the co-owner dies. A similar obligation has been known to end up haunting the adult children of seniors who tried to come to the aid of their parent financially, only to discover that by putting their name on the indebted account, they became liable for the debt once their parent and died.
If someone can’t be held responsible for the debt, the estate of the deceased is used to help pay remaining debts. The executor of the estate will use the estate to pay debts, and even if available assets don’t cover the debt, the debt is wiped out.
Inheriting Credit Card Debt
In regards to credit card debt specifically, there are a handful of states where even if the credit card was not co-owned, you may be liable if the state has community property legislation on the books. In those states, credit card debt is considered community property, which leaves a surviving spouse on the hook for their significant other’s credit card debt.
There are a handful of other exceptions, too. It’s not uncommon for a state to require some specific debts be paid by surviving spouses, mostly in the case of medical expenses. If you want to understand your own obligations, you should consider speaking with legal counsel regarding your local laws.
Do you have a loved one who had or has a problem with credit card debt? What are some tips you can share that helped them get out of debt or how did you family help them manage their debt? We’d love it if you’d share your experiences in the comments below.