So what’s the best way for family or personal representatives to pay for these expenses? Should you write a check or pay for these expenses with the deceased persons’ credit card?
The answer is probably not! Even if you’re an authorized user on these accounts, it may be considered Fraud to continue to use them once a person dies.
Using the credit card, (even for legitimate expenses) may breach the terms of the credit card contract.
The proper way to handle expenses after death is to open a separate bank account. This account should be designated specifically for handling finances of the deceased person and their estate. This can be done by the authorized person handling the estate.
If you have a Trust, then a new account must be opened in the name of the Trust. The Trust is an entity, therefore a new tax ID must be obtained. (As the deceased persons’ social security number is no longer valid). All the accounting and expenses should be paid through this account by the authorized person handling the estate.
Here is a common situation where families get into trouble unknowingly:
It used to be that funeral homes gave families 30 days or more before having to make full payment. This gave families time to file insurance claims and get the funds to pay for these expenses. Now, many funeral homes require payment prior to the burial. Families often have to come up with $10,000 – $15,000 in a matter of days. And often that amount of cash isn’t readily available. So many times, families wrongly elect to use assets of the deceased.
A better way to do this, is to have a family member pay the burial and funeral expenses from their own accounts. Once the estate goes through probate, and accounts are set up to pay expenses, there shouldn’t be any problem getting reimbursed for these expenses. Final expenses take priority over creditors, and any other expenses of a persons’ estate.
So if you anticipate having to handle the estate of a loved one, make sure to research what those duties might entail, and what expenses will need to be paid quickly. If possible, seek assistance from a probate or estate planning attorney.