If your relative grants you power of attorney over their financial affairs, you can make decisions for them and are authorized to act on their behalf. What happens on their death though?

Reader Debbie writes that her mother-in-law was the primary cardholder on a credit card account. Since her health was failing and she had overdue bills, she went to the bank with her son and added him as a second signer on her account. The mother-in-law has since died and after the family notified the bank about the death, they were informed that the bank has canceled the card.

According to Debbie, “We had a bunch of notices in the last two days; her auto payments were not going through. When my husband called, they said they canceled the card because she died and she was the primary.  She had 180,000 mileage points for which they said they would send us $44 reimbursement. My husband called and they would only say it’s bank policy. My husband is her durable power of attorney and trustee. We have a huge amount of money in this bank and pay off the card every month. What are our options?”

What a power of attorney authorization is

Essentially, when someone grants you power of attorney, they are authorizing you to act on their behalf. For instance, you could buy or sell property in your name or make other financial decisions for them. It could be set up so that you are granted the power-of-authority  responsibility once a person becomes incapacitated.

Power of attorney could also be set up to be effective immediately the power of authority is granted. And a durable power of authority means that the power of authority remains in force even though the grantor becomes incapacitated or physically disabled. Typically, grantors will assign such powers so that a trusted individual, such as a family member or friend, can make decisions for them when they are not able to.

Death of the cardholder ends power of attorney authorization

Once the grantor of the power of authority passes away, the power of authority ends. It no longer has any legal authority. Banks should be informed so that they can shut down a dead cardholder’s account.

With the primary cardholder’s account shut down, the card is no longer valid and cannot be used by any authorized users. Authorized users are also not responsible for any debt on the card. If there are any recurring payments set up on this account, you should call the merchants and ask them to stop charging this credit card.

You could also call the credit reporting bureaus and ask them to put in a credit freeze for the deceased to prevent unauthorized individuals from taking out credit in the dead person’s name.

After doing this, you will need to cancel the credit card account of the deceased family member. Credit cards are not automatically canceled when someone passes away.

If you are a joint cardholder, the card will remain active, but you will still have to notify the issuer about the death. You will remain responsible for the debt on the card. And the bank might want to vet your finances to make sure that you qualify for the card on your own.

If you are the spouse of the dead person and live in a state that has community property laws, you may be responsible for paying off the debt even if you are not a joint account holder.

The bottom line

An agent with power of attorney can take legal and financial actions on a principal’s behalf. People tend to have this sort of arrangement so that they can have a trusted individual make decisions on their behalf in case they are physically disabled or incapacitated. However, this authority ends once the grantor dies.

Debbie, your husband’s power of authority over his mother’s affairs ended with her death. He doesn’t have any say on the bank’s closing of his mother’s credit card account on which she was the primary cardholder. It depends on a card issuer’s policy as to how they deal with any accumulated rewards on the account. Inform anyone continuing to bill her card that she has passed away, including the lender on her car loan. That lender will take necessary action, depending on the terms of the car loan, and should cease billing her credit card.

Contact me at pthangavelu@redventures.com with your credit card-related questions.