Dying with Debt

[wodehouse]

I've read several short stories with that theme (and probably saw a few movies with that theme as well).

[wodehouse]

Often not. The movie "Phoenix and Gryphon", the woman with terminal cancer lived off her credit cards. I guess she got away with it since she died. In at least one "science fiction" story people lived freely off the government, then at some given age they had to work for the rest of their lives to pay off what they had consumed (sort of the opposite of reality), one guy lived really really high, then crashed his flying car into the ocean at high speed, utterly destroying his body into molecules. But his debt was so huge that the government put him back together again and he had to serve like 1000 years in some mines on Pluto or something. Seems like it came up in another SF story...Twilight Zone or something.

ed: of course, that's not to say we shouldn't try it ourselves once we're "terminal".

[midjd]

I'm sure it does happen occasionally, but I think most deaths are fairly sudden or the person is in such bad shape beforehand they're not really in a position to do that... plus there are the issues of access to credit (you'd have to either already have a lot or be able to get a lot in a fairly short period of time in order to do much damage).

[BeenThere...DoneThat...]

...I suppose that's one way to ensure you get back what you paid into SS?

[cronewitch]

To do this first you have to live your entire life without having a net worth when you are elderly. Most who do this don't have great credit and once they retire without assets wouldn't be able to get new cards. Old cards might cancel them when they get too deep in debt so they could be paying down the old cards without new cards in the final years.

Moving assets like a house in order to not pay your debts is fraud so they might be able to prove you did it and reverse the gift.

So if I was say 95 and sold my house giving the money to someone and depleted my life savings I could live on credit cards but if I needed a nursing home wouldn't have the money. You can't go on Medicaid for nursing homes because you decided to give away your money. So you would need to have a few years of expenses in the bank to cover the look back period to end up in the worst nursing home so your family could have more. Then you would be getting deeper in debt and dealing with bill collectors instead of enjoying your final years.

Passing assets like a house before you die might mean the family has a huge tax bill instead of a stepped up basis. A very expensive and painful way to cheat the government and lenders out of money.

[april47]

There was a movie recently where Queen Latifah was told by a doctor that she was dying. She went to France and lived high on the hog charging the good life. Then she found out that the doctor had mistaken the lab test from somebody else and she wasn't dying after all. Since it was a movie I think everything turned out OK but the potential for being seriously in debt is mind boggling.

[lazysundays]

I already set up my life insurance to cover the sallie mae student loan- even though he didn't cosign, husband ends up with the debt. the federal loan dies with me.

[wodehouse]

'se Queen Latifah movie reminds me of a friends BF's grandmother. In her 70's she was told she had terminal cancer and would last about two years. She's a spry old lady and lived it up for those two years, living off her retirement savings. Then she realized it was like 3-4 years later. And they found she was in remission. Fortunately she hadn't spent her whole nest egg. She's still going strong in her 90's now, 20 years later.

[TheOtherMe]

My parents are debt free and have substantial savings. However, it is probably not enough to pay for two high cost terminal illnesses and funeral expenses. They have seen relatives end up on Title 19 in nursing homes and assume that is what will happen to them.

That is one reason why my sister and I encouraged them to spend $15K siding their house. They really need new carpet, but my mother is convinced a new buyer will want to pick out their own. The carpet is horrible, but tell that to an 87 year old.

They have recently hired somebody to mow and take care of the snow for them and I think that is money well spent.

It's getting near time for dad to give up driving. Don't tell him I said that. I don't know how it works when it comes to the car.

[Deleted]

My mother basically did this but it wasn't planned. I've posted about it before but you may have not seen it.

When she died her estate was upside down by about $400k. It was primarily due to the plunge in value of her home. In 2006-7 it appraised for $900k. She had an interest only 1st of $450k and over the last couple of years of her life she got home equity loans of $270k mainly because she couldn't work while she had two knee replacement plus another surgery. On January 5, 2008 she was diagnosed with stage 4 pancreatic cancer and died 41 days later. In the meantime the real estate market starting dropping fast. Since I was the Trustee of her Trust I worked with her banks for about 6 months. In July of 2008 the bank re-appraised the unit at $487k. In addition she owed about 40k to the IRS and another 60k to 3 credit cards. It was a very difficult but interesting experience. In the end I was able to pay the 2nd off 10 cents on the dollar and convinced the bank to short sell the home to me. The ccs referred the matter to collection agencies and wrote everything off. The IRS debt was from 1998 and 1999 and there is a statute of limitations on collections so after 10 years that debt aged off.

Technically the estate would still owe some of that money but short of finding a winning lottery ticket it will never happen. And frankly most creditors do a cost benefit analysis to determine whether it's worth a lawsuit to try to pursue the matter further. In my mother's case it made no sense.

[Formerly SK]

Jul 7, 2011 17:55:35 GMT -5 @lonewolf said:

After reading Vsnizzle's thread regarding parents debt, I got to wondering....what's to keep someone, who's sick and dying, from running up all their cards, giving the money to family and then having the debt forgiven when they die?

Ummmm....ethics?

[zibazinski]

Hah hah

[Tiny]

Since most people don'r know when they are going to die this would be a bit tricky.
Yeah. Many of the folks I know who have died, seemed to have spent the final 12 to 24 months not living it up but usually very sick and needing home care and/or in a nursing home. I guess it's everyone's fantasy that they will be happy and healthy and pain free up until the piano (or anvil) falls from the sky and kills them instantly.

For someone elderly running up alot of debt on their CC - I suspect it's someone who is trying to meet daily expenses and that it happens over a period of time. It isn't someone running up 30 or 50K of CC debt on cruises, jewelry, cars and boats and whatnot.

Old age is NOT for the feint of heart.

[april47]

Old age is NOT for the feint of heart.


You can say that again!

[thyme4change]

There was a movie recently where Queen Latifah was told by a doctor that she was dying. She went to France and lived high on the hog charging the good life.

You missed the part in the movie where she had saved every dime she ever earned for some goal, and she had a "ridiculous" amount of money in the bank. You must have also gone to the bathroom during the scene where she bet $100k in roulette and won. So, it turned out okay because she went home with a bunch of money. She used that to start her restaurant. You know - a good stable industry to be part of.

[thyme4change]

If I was dying and ran up my credit cards, wouldn't my husband be stuck with the debt? I know that if I wasn't married and had no assets, the cards would default - but all my assets and debts are joint with my husband - so wouldn't the cards go after him looking for my assets?

[swamp]

Jul 8, 2011 12:40:33 GMT -5 thyme4change said:

If I was dying and ran up my credit cards, wouldn't my husband be stuck with the debt? I know that if I wasn't married and had no assets, the cards would default - but all my assets and debts are joint with my husband - so wouldn't the cards go after him looking for my assets?

Not if the cards are in your name alone. Once you die, the joint assets pass to him free of the debt.

I had a client in that situation. His wife had cancer and she passed her time at home during treatments internet shopping while her DH was at work. She hid the bills from him. When she died, he was surprised to find $30k in CC debt all in her name. The creditors wanted him to pay up, but the cards were only iin her name.

[haapai]

One of the reasons why we probably don't hear about this more often is that it takes either a bit of money or a bit of income to pull off. In order to keep the cards in good standing, you have to at least pay the minimum. You also have to keep your other debts that report to CRAs in good standing or the deterioration of your credit may cause the credit card company to lower your credit limit or close the account.

Paying the minimum doesn't sound like a big deal until you consider that many folks will burn through their cash before turning to the cards. With no cash and no income, paying even the pitifully small minimum payments of 2-3% of the balance may become problematic in a surprisingly short period of time. You run into sum-of-digits-type math pretty quickly (that is, that 3% of what you charged the first month becomes 6% of what you charge the next month and 9% of the next month's charges). This gets out of hand pretty quickly when you also have expenses that must be paid with cash.

I suspect that most credit card issuers have algorithms that spot people taking out cash advances to keep the minimum payments made and cut that off quite quickly. Once you cut off that way of keeping the cards paid, your options of for turning your credit into cash for keeping your credit cards open get kind of expensive (buying stuff on the card and selling it for cash) or require a confederate who will pay you cash for purchases made on their behalf or make the minimum payments on your behalf.

[Gardening Grandma]

Jul 8, 2011 12:43:42 GMT -5 swamp said:

Jul 8, 2011 12:40:33 GMT -5 thyme4change said:

If I was dying and ran up my credit cards, wouldn't my husband be stuck with the debt? I know that if I wasn't married and had no assets, the cards would default - but all my assets and debts are joint with my husband - so wouldn't the cards go after him looking for my assets?

Not if the cards are in your name alone. Once you die, the joint assets pass to him free of the debt.

I had a client in that situation. His wife had cancer and she passed her time at home during treatments internet shopping while her DH was at work. She hid the bills from him. When she died, he was surprised to find $30k in CC debt all in her name. The creditors wanted him to pay up, but the cards were only iin her name.

I'm pretty sure that would not work in a community property state.

[thyme4change]

Does community property apply to estate laws/probate, or only to divorce?

[Gardening Grandma]

I'm not a lawyer, but it's my understanding that it depends on the states. And that in some cases, the surviving spouse can be liable for the community debt....

[tiredturkey]

"I'm pretty sure that would not work in a community property state."

DH and I are in a community property state and neither my cc debt nor his will accrue to the other when we pass. Yes, the debt will accrue to the estate of the deceased but not to the survivor as an individual. Of course, this is a moot point because we don't have any cc debt. ;D

[Gardening Grandma]

Jul 8, 2011 19:57:50 GMT -5 @tiredturkey said:

"I'm pretty sure that would not work in a community property state."

DH and I are in a community property state and neither my cc debt nor his will accrue to the other when we pass. Yes, the debt will accrue to the estate of the deceased but not to the survivor as an individual. Of course, this is a moot point because we don't have any cc debt. ;D

I wouldn't be so sure. It really does depend on the specific state's laws.

"In community property states such as Wisconsin, Washington and Texas, all assets -- and debts -- are considered joint property, even if the debt was taken out before two people got married. So even if you did not cosign on a loan for your spouse but you live in a community property state, you inherit the debt.

From another site:

Community Property States
Generally speaking, in community property states, debt incurred by a spouse for the benefit of the family is considered a “community” debt, and therefore the spouse is responsible for repaying that debt. All assets and earned income acquired during a marriage is divided in half, with each partner owning fifty-percent. Thus, the debt acquired is considered the same way – half and half. If the assets do not cover the debt, the surviving spouse will be liable for their community debt. However, each state writes its own legislation, making it imperative that you consult with an attorney in your state to understand your rights and liabilities.

From the WA code:
f.  Surviving Spouse's Liability for Decedent's Debts
 
A spouse is always separately liable for his or her own torts or contracts.  The act of one spouse, however, can create community liability under the doctrine of respondeat superior --- that the act was done for the benefit of the marital community or in the course of managing community property.  Benson v. Bush, 3 Wn.App. 777 (1970); Aichlmayr v. Lynch, 6 Wn.App. 434 (1972). 

[Phoenix84]

By the time you're old and infirmed enough to know you'll die soon, I doubt you're in shape enough to go on a shopping and traveling binge. Kind of hard to travel to Europe and buy a bunch of stuff when you have stage four cancer and on chemotherapy. Plus if you are retired and don't have significant assets, you're likely not to qualify for lots of credit anyway.