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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 you’re an authorized user, you’re allowed to use someone else’s credit card, but you’re not responsible for paying the charges.
That’s just my hunch, though. To confirm that you’re 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 you’re not listed as a joint account owner or co-signer, you shouldn’t be liable for your dad’s debt — not now and not when he dies. Since you didn’t sign anything, this shouldn’t 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 else’s 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 can’t cover what he owed, his creditors simply won’t get paid. You and any other survivors wouldn’t receive an inheritance, but you wouldn’t have to pay off your father’s debt, either.
Still, assuming you are an authorized user, I think you should remove your name from your father’s account. You can typically do so by calling the credit card company and asking it to remove you.
Even if your dad isn’t 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. Everything’s 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 you’re in your 30s, you’ve probably had ample opportunity to establish credit on your own. To avoid potential credit damage, I’d want my name off this account.
The other reason for removing yourself as an authorized user is that it’s 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 wouldn’t offer them a tequila shot, even though it’s just one drink. And I certainly wouldn’t assume that your father got his spending under control as a result of losing his job.
I don’t know how close you are to your father. But if you have a relationship, I’d suggest talking with him directly about his finances. That doesn’t mean you have to step in to fix things if he is, in fact, facing hardship. But it’s generally a good thing to have a sense of your parents’ money situation so that you’re 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.
