Dear Penny, A few years ago, my parents got divorced. I'm in my mid-30s with my own family. The divorce was messy with lots of debate over money. My mother confided that my dad is deep in debt, spending...
A few years ago, my parents got divorced. I'm in my mid-30s with my own family. The divorce was messy with lots of debate over money. My mother confided that my dad is deep in debt, spending sometimes $30,000 a month, at least, when she could still see his bank accounts. I don't know if it's still like that. I do know that he lost his job in the last couple of years so it may not be as bad.
A long time ago, he put my name on a credit card that we share, and he said I can use it to make purchases when needed. I don't spend a lot on it, but if he wanted me to order Disney tickets or something for our family, I'd use his card. I use it to buy meals here and there.
What I'm wondering is, when he passes, will I be responsible for his exorbitant debt? I can understand taking on my student loans that he has worked toward, but I don't think the rest of this credit card debt should fall to me if I've spent only small amounts on this card. I never signed anything or asked for the card.
What can I do to protect myself and my credit?
-M.
Dear M.,
My guess is that your father made you an authorized user on his credit card. When youre an authorized user, youre allowed to use someone elses credit card, but youre not responsible for paying the charges.
Thats just my hunch, though. To confirm that youre an authorized user, go to AnnualCreditReport.com and see how the account is listed on each of your three credit reports. You could also call the credit card company to verify your status.
As long as youre not listed as a joint account owner or co-signer, you shouldnt be liable for your dads debt not now and not when he dies. Since you didnt sign anything, this shouldnt be an issue as long as your father is trustworthy. But sometimes excessive debt and out-of-control spending can drive a person to do desperate things, like sign someone elses name on a credit application. So for peace of mind, you need to verify that nothing like this occurred.
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If your father dies with debt, his creditors will have to file a claim in probate court. If his estate assets cant cover what he owed, his creditors simply wont get paid. You and any other survivors wouldnt receive an inheritance, but you wouldnt have to pay off your fathers debt, either.
Still, assuming you are an authorized user, I think you should remove your name from your fathers account. You can typically do so by calling the credit card company and asking it to remove you.
Even if your dad isnt racking up debt in your name, authorized user status affects your credit. In fact, many parents make their children authorized users to help them build good credit in early adulthood. Everythings great when the parent has solid financial habits meaning they pay their bills on time and keep their revolving credit balances low.
But if the parent misses payments or has high credit usage, their actions can adversely affect any authorized users. Now that youre in your 30s, youve probably had ample opportunity to establish credit on your own. To avoid potential credit damage, Id want my name off this account.
The other reason for removing yourself as an authorized user is that its the right thing to do if you suspect that your dad has a spending problem. The infrequent purchases you make using this card may be minor. But if you believed someone was struggling with alcohol addiction, you probably wouldnt offer them a tequila shot, even though its just one drink. And I certainly wouldnt assume that your father got his spending under control as a result of losing his job.
I dont know how close you are to your father. But if you have a relationship, Id suggest talking with him directly about his finances. That doesnt mean you have to step in to fix things if he is, in fact, facing hardship. But its generally a good thing to have a sense of your parents money situation so that youre not blindsided if they need help at some point. This can also be helpful because many people need help managing their money as they get older.
If your dad really is spending to the tune of $30,000 a month, there may not be much you can do. But by removing your name from his credit card, you can separate your finances and avoid contributing to his problem.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
