who's responsible for debt when a parent passes?

[Deleted]

My mother in law is in ill health. Her parents and siblings have been taking care of her for a while now, but her most recent episode has forced her to give up her apartment and move in with family members for constant supervision (she's highly prone to strokes, seizures, etc.) Upon moving in with her parents, they have learned that she is carrying around ~$15k in credit card debt. She had been charging groceries and necessities. From what I know, she has always made the minimum payment and has paid on time. My (somewhat selfish) question is - should she pass away before that debt is paid, who becomes responsible for it? Neither my husband, nor his brother would be capable of paying such a debt and honestly, I don't think they should because it isn't THEIR debt. My husband has trouble saying no though, so my paranoid self fears that he would agree to pay it if a creditor came knocking on our door. Our family cannot afford that.

I'm sure this has been asked before, but I'm rarely on the boards. Can anyone offer some simple advice or peace of mind? Thanks.

[swamp]

Her estate is, meaning any assets that are in her name alone. No assets, no payment. Easy peasy.

[Gardening Grandma]

I'm not a lawyer, But my understanding is that her estate is responsible for her debts. If she has any assets, they would need to be liquidated and her debts paid off. If she has no assets, the executor notifies the creditors that she's dead and there's no money. They may require a death certificate.

[NomoreDramaQ1015]

My parents were told they weren't responsible for my grandmother's consumer debt after she died. She had no estate so there was nothing for the companies to collect off of. They sent the death certificates and we spent several months having them call trying to find someone who wouldn't realize they didn't have to pay it. We stood our ground and told them she was dead, there is no estate so eat it.

[tskeeter]

vsnizzle, your MIL's debts belong to her estate. If the estate doesn't have enough assets to pay the bills, the creditors are out of luck. Family members are not responsible for a deceased person's bills unless they co-signed, or in some other fashion made themselves a party to the credit arrangements. The creditors extended credit to your MIL, not to your husband or his siblings. One of the risks the creditors took in exchange for the finance charges they have been collecting is that your MIL could die without enough assets to pay all of her bills. Tough luck for the creditors.

Occasionally you do hear about some creditors trying to collect a deceased person's debts from family members (especially companies that buy debts that other companies have written off as uncollectable). If they can get the family to pay the debt, the creditor wins. But, if you didn't sign the credit application, you don't owe the debt. Regardless of what the creditor's collection department tells you.

[hoops902]

The thing to remember is that you can't just go take MIL's belongings once she passes. Those are also part of her estate. So you don't get to take her sterling silver, wedding ring, or whatever else once she passes and then tell the creditors there is "nothing" because you've already taken it.

[lazysundays]

I'm more concerned here about "she's highly prone to strokes, seizures, etc." How are you "prone" to such things? There are preventative measures, much as losing weight, close monitoring of blood sugar if diabetic, etc etc...
I think you should be focusing on this instead... Sorry, my family has a family history of strokes etc, but good prevention seems to work wonders.. I hope you take care of her enough that she lives long enough to pay off that bill.

[swamp]

Jul 7, 2011 11:44:48 GMT -5 hoops902 said:

The thing to remember is that you can't just go take MIL's belongings once she passes. Those are also part of her estate. So you don't get to take her sterling silver, wedding ring, or whatever else once she passes and then tell the creditors there is "nothing" because you've already taken it.

She should give it away before she dies.

[Deleted]

Jul 7, 2011 11:44:48 GMT -5 hoops902 said:

The thing to remember is that you can't just go take MIL's belongings once she passes. Those are also part of her estate. So you don't get to take her sterling silver, wedding ring, or whatever else once she passes and then tell the creditors there is "nothing" because you've already taken it.

Thanks all. There were no cosigners, and she's got nothing to take. Not even a wedding ring. No assets, no silver, nada.

That's a HUGE load off my mind, as long as I can make sure my husband and brother in law fully understand that they are not responsible and shouldn't be conned into paying a cent.

[phil5185]

Occasionally you do hear about some creditors trying to collect a deceased person's debts from family members (especially companies that buy debts that other companies have written off as uncollectable).

Yes, watch for this - some not-so-scrupulous collectors sometimes try it - so be ready to "just say no". Her savings, her car, etc, will be sold by the executor - the proceeds will go toward the $15,000. But any remaining debt dies with the borrower.

[NomoreDramaQ1015]

They might call you and try to get you to pay them, be aware of that. They were calling first cousins of my mother trying to find SOMEONE who would balk and pay them so they would go away. Lasted about six months off and on after my grandmother's death.

[Deleted]

Jul 7, 2011 11:45:45 GMT -5 lazysundays said:

I'm more concerned here about "she's highly prone to strokes, seizures, etc." How are you "prone" to such things? There are preventative measures, much as losing weight, close monitoring of blood sugar if diabetic, etc etc...
I think you should be focusing on this instead... Sorry, my family has a family history of strokes etc, but good prevention seems to work wonders.. I hope you take care of her enough that she lives long enough to pay off that bill.

She has struggled with MS for years. Her medication is supposedly whats causing the seizures, each one worse than the last. Docs have been doing what they can, experimenting with just about everything. Thanks for your concern.

[lazysundays]

I'm sorry about mom, I guess it's all in the wording

[msgumby]

I have a related question. Does a life insurance policy count as part of the estate? My MIL will die with nothing to her name, but insists on having a large life insurance policy to "leave something behind." She is also prone to debt, and I am curious as to how the life insurance impacts this.

[swamp]

Jul 7, 2011 14:34:08 GMT -5 msgumby said:

I have a related question. Does a life insurance policy count as part of the estate? My MIL will die with nothing to her name, but insists on having a large life insurance policy to "leave something behind." She is also prone to debt, and I am curious as to how the life insurance impacts this.

If the policy is payable to "the estate' it is. If it's payable to a person, no, it's not.

[msgumby]

thanks swamp - it's payable to my husband.

[Deleted]

Jul 7, 2011 14:34:08 GMT -5 msgumby said:

I have a related question. Does a life insurance policy count as part of the estate? My MIL will die with nothing to her name, but insists on having a large life insurance policy to "leave something behind." She is also prone to debt, and I am curious as to how the life insurance impacts this.

She must be paying an arm and a leg for that insurance policy..

[msgumby]

yes she is - and i've spoken with her numerous times to try to get her to cancel them. She has about 3 policies totalling to about 1 million (currently unemployed, but when employed makes about 20k/year or less). She does have a small child (about 10 now), but I've told her that if she passed we would care for the child and didn't want/need her life insurance policy. She seems to view this as our "inheritance" and her way of paying us back for helping her out during life - she almost discusses it like we would be winning the lottery after she died. She is also convinced she can't cancel because at her age and with her background (chain smoker) she will never be able to qualify for a policy again (while that is true, she has absolutely no need for life insurance at this point). I have spent countless hours discussing this with her (even getting her to agree to cancel them without any follow-through) and have come to the conclusion that she will never change her ways. They are all term policies, so a few of them will run out soon anyways. But it does drive me crazy how over-insured she is.

[hoops902]

Jul 7, 2011 16:07:11 GMT -5 msgumby said:

yes she is - and i've spoken with her numerous times to try to get her to cancel them. She has about 3 policies totalling to about 1 million (currently unemployed, but when employed makes about 20k/year or less). She does have a small child (about 10 now), but I've told her that if she passed we would care for the child and didn't want/need her life insurance policy. She seems to view this as our "inheritance" and her way of paying us back for helping her out during life - she almost discusses it like we would be winning the lottery after she died. She is also convinced she can't cancel because at her age and with her background (chain smoker) she will never be able to qualify for a policy again (while that is true, she has absolutely no need for life insurance at this point). I have spent countless hours discussing this with her (even getting her to agree to cancel them without any follow-through) and have come to the conclusion that she will never change her ways. They are all term policies, so a few of them will run out soon anyways. But it does drive me crazy how over-insured she is.

I'm not sure she's AS overinsured as you think she is. What if you and Mr Gumby die in some accident? Who's going to take care of her 10 year old and are they willing to do it based on having to provide 100% of the support for the child? If she was doing this strictly as an inheritance I would agree it's kind of nuts. At least she's attempting to be responsible when it comes to her child though.

The entire point of life insurance is because you never know what MIGHT happen. If she passes and you and DH take care of the child then that's great. If something happens to you guys first though, she's going to wish she'd kept the insurance isn't she? She might not need $1M, but I also dont' think she should have zero no the assumption if she dies you guys will be there to take the child.

[zibazinski]

Kid would get SS.

[Nazgul Girl]

So sorry about your mother-in-law. I'm glad that you're there for her. Just struggling to make her minimum payment shows that she was trying to do the right thing.

[mithrin]

Sounds like there's a decent reason to keep the policy that benefits the 10 y.o. in place. But not so much the policies for her grown children. It's not like they are relying on her for support at this point. Hopefully she doesn't try to renew those when the term runs out. Imagine the premiums for $1M worth of policies on a woman with a history of strokes and seizures!

OTOH, you say that your family can't afford to deal with her 15K in CC debt right now. However, if she dies with the life insurance policies in place, 15K is only 1.5% of the combined $1M payout. May be worth paying it just to avoid the phone calls.

[msgumby]

hoops - she has numerous family members who have made similar offers over the years. I do get that she needs to look after her young kid, but her payments on her life insurance policy end up being over 1/5 of her gross pay (when she was working), which is ridiculous. They live in a VLCOL area, and 1 million is more than excessive (and way more than she can afford) in her situation. Most of the other relatives live in this same VLOCL area and make less than 50k/year, so 1 million is way more than they would need to get a 10 year old to adulthood. We live in a HCOL area, but because of that we make a lot more money, so we could afford to take care of the kid without too much trouble. I also never pushed for her to get rid of ALL the policies, just to cancel some of them so that she had a reasonable amount (which she agreed to at some point and then never followed-through on). She was going without health insurance so she could have (at least) 3 different life insurance policies.

It's also the mindset when I talk to her (it seems like she would have 1 million in life insurance without having the kid) that we will win big when she dies. She acts like her insurance is her legacy to pass along to us and how great it will be for us to get this present when she dies. While I wouldn't turn down money, she cannot afford the level of insurance that she has, and we would much rather have her be able to afford health insurance and basic neccesities (and need fewer handouts from us) than have that high of a coverage.

[msgumby]

mithrin - i'm different than the origonal poster - I sort of hijacked the thread (sorry) to ask a similar question and we got distracted by life insurance issues.

[msgumby]

hoops - i guess part of it is that i view that level of coverage more of a want than a necessity. We did finally talk her into getting health insurance (although I haven't been able to confirm that she did get it). But at this point she has zero dollars of savings (retirement or otherwise), filed bankruptcy about 5 years ago, and has needed help from us paying her bills (monthly electric bills, car repairs, divorce costs, and other "unexpected" costs) - all while continuing to pay for that 1 million in life insurance. If you can afford that kind of a policy and it helps you sleep at night, go for it, but if you can't pay your electric bill because you have to pay your life insurance policy, then you need to start thinking if you can reduce that expense. Right now she is living off unemployment and student loans, and still has that level of coverage - so I don't think she should be going into debt to keep all those policies active.

[bring in the new year]

Depending on how much she made in her life, SS may not be that much.

Until this year, SS sent out an annual statement telling what you would get from SS if you retired or what your children would get if you died. You might want to look at that sheet and then figure out how much life insurance she would need.

I know a million sounds like a lot, but there's funeral expenses, hospital bills and 10 or 11 years of supporting the child, possibly college. And health insurance, braces, childcare etc. She can probably make do with half that but what I would really be concerned about is - is the child currently on some kind of assistance program? What happens if the child inherits that money? Can the state come after the insurance to pay back the assistance?

Does she have a will?

[msgumby]

I don't think SS will pay all that much - she's been working her whole life but with very low income the whole time. It's not something we are counting on. The life insurance is soley in my husbands name (not the child's name) because she trusts him with the money. She has a will, which lists me and my husband as her guardian and my husband as getting all her "assets." She does trust her other family members, but trusts my husband the most and realizes there could be complications leaving it in the child's name. In terms of assistance, they had foodstamps for a while, and now they are on unemployment (and the foodstamps went away). I think the child is getting her health insurance from the government, but that is all the assistance they have ever gotten.

Personally, I don't think a million is a lot for life insurance for people that can afford to have it - it's less than my husband and I are planning on having. But, they live on a trailer on a small plot of land, so there will be no need to pay off a house (we also have a house of our own that would have room for her), in a VLCOL area. She has 4 siblings that all aren't well off financially, but could combine to chip in if absolutely needed (and the family is close and a few have helped her out with money over the years). We typically save about half our gross income (less when we need to send money their way), so we could easily support the child (it actually may be less than we've been paying to help the MIL and child at this point). And I think it's ridiculous to be paying greater than 1/5 of your gross income on life insurance - that's just something she can't afford. Like I said, if she could afford this plus her necessities, she could spend her money all she wants - but when she needs help to pay her necessities (electricity and health insurance), it doesn't make sense to have that large of a life insurance policy. When you make <20k a year, a million dollars of life insurance is just a luxery you can't afford. If a poster put up a budget with <20k gross income and paying 300-400 money per month on life insurance (probably one of their highest expenses) - with no savings, retirement accounts, and a net negative cash flow, I would guess everyone would be screaming to cut that down to a lower amount.

I was also under the impression that if she died with hospital bills, but no assests in the estate, that that debt would die with her. Are hospital bills treated differently from credit card bills? She also has some wacky "illness" policies that I have never gotten a straight answer as to what exactly they are, but they pay her some lump sum of cash if she gets specific illnesses (one is for cancer, and I think she has another one for something else). This isn't included in the life insurance discussion above because I've never been told exactly what these are, how much they pay, and would assume that because they pay out when she is alive, they wouldn't be of relevance for an inheritance discussion.

[swamp]

::Are hospital bills treated differently from credit card bills?::

No.