Credit Theft and Identity Theft: What You Need to Know to Safeguard Your Loved One’s Identity and Estate
The passing of a loved one is one of the most difficult experiences a person can have. The grieving process and the task of arranging the affairs that your loved one left behind requires all your energy and focus. Unfortunately, criminals know this and take advantage of it for personal gain.
As you focus on your grief and tasks, you might fail to realize that a person’s identity is vulnerable to theft after their death. Identity thieves can steal your deceased loved one’s personal information and use it to open credit accounts, make purchases such as cars, and commit fraud. This is a growing concern as it has been reported that 2.5 million deceased Americans’ identities are used improperly each year.
Thus, it is crucial that you understand credit and identity theft to protect your loved one's legacy from these malicious threats. In this guide, we’ll walk you through all you need to know about identity and credit theft in the aftermath of death. Here, you will learn the proactive measures you can take to safeguard your loved one’s identity and estate.
Identity Theft and Credit Theft Explained
Identity theft and credit theft are closely related forms of fraud, differing only in how criminals use stolen personal information to their advantage.
Identity Theft
Stealing personal information such as name, Social Security number, date of birth, or other sensitive details.
A stolen identity can be used to impersonate the victim, open new bank accounts or lines of credit, file fraudulent tax returns, apply for loans or government benefits, commit crimes, etc.
It can have long-lasting effects, as victims may not discover the theft until significant damage has been done, and the information can be misused repeatedly.
Credit Theft
A specific type of identity theft wherein credit information is stolen to make unauthorized financial transactions.
Stolen credit information can be used to make purchases, open new credit accounts in the victim's name, and take out loans or cash advances using the victim’s credit.
It can impact the victim's credit score and financial history, often resulting in debt and the need to dispute charges and repair credit (which is difficult and time-consuming).
Why the Deceased is Prone to Credit Theft or Identity Theft
After a person dies, their personal information remains active for some time, making it vulnerable to theft and misuse. The identity and credit information of your deceased loved ones are a magnet to fraudsters due to the following reasons:
Delayed Detection
When a loved one dies, the bereaved family often takes time to update records, cancel accounts, and notify authorities. During this time, criminals can use the deceased’s personal information to commit fraud without immediate detection.
Unmonitored Financial Accounts
Often, fraud goes unnoticed for months because there’s no one monitoring the deceased’s accounts or credit activity closely. After a person dies, their financial accounts, such as credit cards, bank accounts, and loans, might remain open until the estate is settled. Also, the financial institutions involved rarely get notified immediately of the account holder’s death. Thus, thieves can use the deceased’s credit cards, apply for new ones, or make fraudulent transactions undetected.
Accessible Public Information
The deceased person’s personal information is often easily available to the public through obituaries and government or public records. Obituaries often include full names, birthdates, and family details. (If you think about all the security or identity verification questions you have on accounts, the details in an obituary offer many of the answers.) Also, death certificates filed with state or local government agencies are easily accessible to thieves.
Convenience and Low Risks
Opening new credit accounts has become so much more convenient nowadays. It’s easy for criminals to take out loans or even apply for government benefits online with only a little information. Without the deceased person to monitor their accounts or report suspicious activities, there is a low risk of getting caught.
Impact of Identity and Credit Theft on the Estate
Identity or credit theft can hurt a deceased person’s estate in several ways:
Delaying Probate
Probate, or the process of settling the estate, can be delayed if fraudulent debts, credit accounts, or legal disputes arise because of stolen identity information. Thus, it may take a long time before the heirs receive their inheritance or shares of the estate.
Depleting Assets
When thieves use stolen identity information to open new credit card accounts, take out loans, or make fraudulent purchases, they lead to debts that can appear legitimate. The estate would then be liable for these debts, reducing the value of the inheritance for the heirs or beneficiaries.
Burdening the Heirs
In some cases, when a deceased person’s estate is tied up in debts due to credit or identity theft, the heirs end up paying for these debts. Imagine grieving for your loved one’s passing and, on top of that, suffering the financial burden of these fraudulent debts.
Increasing Legal Costs
Disputes involving identity and credit theft require expert legal intervention. You will need to hire attorneys to persecute the criminals, clear the deceased’s credit report, and remove fraudulent debts. These legal costs could further drain the estate’s assets or add to the financial burden of the bereaved.
Tax Fraud
When thieves use stolen identity information to claim tax refunds or benefits, the IRS (Internal Revenue Service) may persecute the deceased or their bereaved family for tax fraud. Filing for the final tax return and resolving the suspected fraud will require IRS audits, further delaying estate settlement and potentially exposing the estate to legal and tax liabilities.
Emotional Impact
The family of a deceased person whose identity has been stolen and misused will feel that criminals have violated their loved one’s personal information and financial legacy. Add to that the feeling of loss, helplessness, and shock of the fraud discovery. These emotional impacts could lead to significant stress and lasting trauma.
Steps to Safeguard Against Identity and Credit Theft
If you do not want your family or your loved one’s estate to suffer the above impacts of credit and identity theft, here are the essential steps you must take:
1. Secure financial accounts.
Notify financial institutions of your loved one’s death as soon as possible. Close unnecessary accounts and stop automatic payments. For accounts that must remain open during estate settlement, appoint a lawyer or a qualified family member as the executor who is the only one authorized to manage them and monitor the accounts regularly.
2. Notify the SSA and IRS.
Report the death to the SSA to prevent fraudulent claims for benefits. Additionally, notify the IRS to prevent identity thieves from filing false tax returns in the deceased’s name.
3. Contact credit bureaus.
The three major credit reporting agencies, Equifax, Experian, and TransUnion, are typically notified of a person’s death by the SSA (Social Security Administration), but you can notify them directly to speed up the process and protect your loved one’s identity.
While you’re at it, you can also perform a “freeze” on your own credit to protect yourself from credit theft. Freezing means you can only open new credit cards or apply for loans if you personally call or log in and unfreeze it. You can freeze your credit here: Equifax, Experian, and TransUnion.
4. Monitor credit reports.
Even when grieving or arranging your loved one’s affairs, take some time to periodically check the deceased's credit report for any unusual activity. If you are the legal spouse or executor, you can request a copy of the credit report to ensure there are no unauthorized accounts or suspicious activity.
5. Cancel identity documents.
These include your loved one’s driver’s license, passport, Social Security, etc. Immediately cancel them to prevent criminals from using them to impersonate the deceased or apply for credit.
6. Manage digital accounts.
Digital accounts can also provide personal information to identity thieves. Ensure that any accounts tied to financial information are properly secured or closed. You can work with an estate planning attorney experienced with digital assets, such as the Rilus Law team, to achieve this.
7. Limit the information you share to the public.
Be cautious about the personal details you share in obituaries and public death announcements. Limit the information to names and birthdates. While it goes against tradition, it is safer to refrain from giving the deceased’s middle name, birthplace, relatives’ names, etc.
Prevent Credit and Identity Theft with Estate Planning
Aside from distributing assets, estate planning can also protect an estate from unforeseen risks like identity theft. Because a comprehensive estate plan moves the majority of your assets into a trust and out of your personal name, it provides a layer of asset protection. Additionally, estate plans are now able to include instructions for handling personal data and digital accounts.
You don’t want your loved ones to deal with the invasion of your credit or personal identity upon your death. Start planning your estate today.