Death and Money - LONG (You are warned)

[peggy]

There's really no easy way to open this post, given the subject matter and the circumstances. So I'll just be blunt. My BIL was murdered on April 23. Since then, I've been dealing with what the DH calls "estate triage." I've now learned more than I wanted to know about things like probating a will, handling debts and creditors in such an event, and dealing with anger at the departed for being f-ing STUPID when it came to finances and leaving a new widow to deal with it all. Said widow, my DH's sister (aka SIL), has been leaning on my DH and me for handling the administrative details; more on that later.

Here's what SIL is facing:

(1) When BIL died, he and SIL had only about $100 in their bank account. And six figures of debt. On top of that, they were looking at about $20,000 in capital gains taxes owed for the 2006 tax return. BIL had his own company and was, the week he died, supposed to start new jobs that would've put money in the bank and brought all of their debts (which they were behind in payments on) current. He died, and those jobs will never be completed.

(2) BIL owned his own business as a sole proprietorship. There's nothing wrong with that, of course, but what it means is that not only his personal assets, but his business assets are now locked in the probate process. SIL would like to sell one or more of the company vehicles to cover her current living expenses -- but that's not possible, as the court has not yet issued letters testamentary appointing an executor/personal representative/administrator for the estate. Until those letters are issued, the assets in BIL's business are, essentially, in limbo -- nobody has authority to act on behalf of the estate. (SIL has, due to the circumstances, decided to step down as executor; DH is the alternate executor named in the will.)

(3) BIL and SIL had, a few years back, deeded their house out of both of their names and into just BIL's name. (This, more than anything else, is what triggered probate on the will, as far as I can tell.) The house is leveraged 100% (and maybe more; they have a first mortgage that's an ARM with increasing payments each month, a second mortgage, and a maxed-out HELOC), and because the house is solely in BIL's name, there's nothing that can be done with the house until the probate court allows.

(3.1) BIL chose to build an addition onto the house last year rather than, say, make necessary repairs to the house. So my SIL is facing a huge amount of repairs that will need to be done before the house can be sold (if she chooses or the court orders), and she doesn't have the money to pay for them. And BIL took out a loan to build that (IMO, unnecessary) addition.

(4) Despite the fact that the house is deeded solely to BIL, both his and SIL's names are on the various mortgages, so she's responsible for all that debt and has no current income to cover the monthly payments. (SIL is a realtor and has not had any commissions recently.)

The end result of all of this is that DH and I have paid for the biohazard cleanup of their house (BIL was killed at home), paid for the funeral expenses, and fronted several thousand dollars for living expenses and debt payments. The probate process has been started, but it will be at least a month (so our probate attorney says) before the court will issue letters testamentary. The life insurance proceeds will be paid at the life insurance company's convenience -- the soonest we can hope for is about a month.

In the meantime, SIL is back to work, getting listings and working on closing deals. DH and I aren't sure how much more money we can loan her for living expenses and we're being thankful that we have what most reasonable people consider an obscenely large emergency fund that we've been able to draw from to help her to this point; most of the rest of the family doesn't have money to spare, though those who do are willing to loan what they can.

DH and I knew that BIL and SIL were struggling; we hadn't known just how badly in debt they were/are. It turns out that BIL really liked to live high off the hog and apparently didn't care how much debt he racked up to do so. He's left SIL in a precarious situation, helped only by the fact that he had a life insurance policy that we THINK will cover the debts. He's left nothing for his three children -- who are all about ready to start college.

So -- a couple of take-away lessons:

(1) Get a will. Right now, today. I don't even want to think about what we'd be facing if BIL hadn't had a will. Consider a trust if you have significant assets; if you decide a trust is not for you, then please consider how your assets are owned - and what that ownership arrangement means for your spouse/partner/SO/children in the event that you die tomorrow. Nobody thinks they'll die tomorrow; my BIL spoke to SIL just an hour before he died and had no idea what awaited him that day.

(2) Look over your circumstances and make sure that every legal document you have (business papers; deeds; and so on) are in the correct names for ease of transfer of assets should you die tomorrow. Talk to the relevant professionals and consider the money spent to be buying your spouse/partner/SO/children's peace of mind. In SIL's case, having the house and some other accounts in both names as joint tenants with right of survivorship might have streamlined the process. It also prevents bank accounts from being inaccessible.

[cute fuzzy bunny]

Peggy -

I'm very sorry for you and your husbands loss and everything that has come from it. Thank you for sharing all this information...i'm sure its a huge wakeup call for a lot of people.

[Martha]

I am so sorry. Your suggestions are excellent.

Some states have victim reparation funds that may be available to help your SIL. She might want to check.

If she is upside down on the house, I would suggest thinking about walking away from it and letting the lender foreclose. Most of the time the lender will foreclose and will not look for a deficiency. It is even less likely to look for a deficiency judgment in a sad case such as this.

The taxes will have to be paid. However, the SIL should talk to a creditor debtor attorney about options concerning the other debt. She may be able to preserve a good portion of the life insurance to help her get a head start on her life going forward. PM me if you want to chat about any of this.

[Spanky]

Peggy,

Thanks for sharing the info that serves as a reminder for all of us about the importance of a will or trust.

Spanky

[bbbamI]

Yes...thank you for sharing. Writing about it must have been very difficult for you.

My best to your family.

[bssc]

My sympahty goes to your family. I hope that someone is able to benefit from your sharing of your BIL story.

[CybrMike]

definitely a wake up call. Maybe not appropriate, but how in the world was he murdered in his own home? This strikes me as perhaps the scariest thing!

[kumquat]

peggy,

My sympathies, both for losing your BIL and for being the executor.

My BIL died April 12, I'm his named executor. While it wasn't murder, the cynic in me wants to call it suicide (too stuborn to go to a doctor) but that's already in another thread.

His situation was similar and different. He has a lot of assets (couple of $M) but all were in his name only. Here in Canada, the bank will pay funeral expenses out of his account and did. SIL, was SOL. She had no assets in her own name but retirement accounts. Despite our offers to lend her living money, since she will be a wealthy widow eventually, she was reduced to cashing in retirement accounts and absorbing the tax bill.

Gets better, BIL was a farmer and now all his assets (land, machinery, money etc) are in limbo until probate court officially appoints me administrator (could be months). Unfortunately, seeds must go in the ground. How? no one can legally operate the farm? Since SIL will certainly be the only beneficiary (as per will) and I assume the court will give me legal status, she has agreed with her DD and SIL that they can operate it (was BIL's plan to retire and turn it over to them next year), not legally enforceable but option is to grow weeds since no one can legally operate it. Great, but the kids don't have the money to plant a crop. Bank requires a lease to give an operating loan, no one has the authority to grant one. Soon to be well off SIL is willing to co-sign but has no assets yet. Result? I've co-signed the bank loan for the kids and I'm sure they will do fine.

Lesson?
1) Seven digits in assets are useless while tied up by the courts.
2) Courts are slow
3) Plan for the worst case senario (if he'd died in October, we wouldn't likely have these problems).
4) Not every kid has a well to do uncle who can get them through this.

How?
1) As peggy said, have a will. It may not be enough but it's a start.
2) As peggy said, consider how your assets are held. In Canada at least, your DW gets half anyway, put her name on the title. If SIL's name was on the title, the land at least would already be hers and this rant wouldn't be here.
3) Make sure your DW/DH/SO will have access to some money to get thru the time required to settle the estate. Term life is an option, if only because it's available sooner even if not needed in the long term.
4) (Sarcasm) Make sure your executor has sufficient assets (and faith in your beneficiaries) to support them until the estate is settled.

[Outtahere]

Peggy, I'm so sorry for all that you and your family have to deal with at a time like this.

[peggy]

Thank you all for your kind thoughts and wishes, and for the good advice.

Kumquat -- I'm sorry to hear you're in a similar situation. When we get through this, let's have a virtual drink together, okay?

[OKLibrarian]

We've been rationalizing procrastinating on the Will front as we don't have a house yet, all our accounts are joint and there are no kids in the picture. I'm calling a lawyer next week after we get back from our vacation.

[kcowan]

OKLib
Make a detailed list of your wishes and eventualities before meeting with the lawyer. He cannot invent your situation and if he has to drag it out of you, it will cost on the clock. We ended up with a complicated scenario that no lawyer would have voluntarily created for us.

Peggy
You are a great sis! I can relate to your BIL because he was an enterpreneur and all of us think we are going to live forever and have limited patience for detail. I "got religion" only after retiring in 2002.

I think your friend ought to consider bankruptcy of the business based on the proprietership having no future without BIL (unless the assets are worth a lot). With that and the house mortgage behind her, sis should have a good shot at regaining her life.

Our sympathies are with you all!

[calmloki]

Quote:

Originally Posted by OKLibrarian We've been rationalizing procrastinating on the Will front as we don't have a house yet, all our accounts are joint and there are no kids in the picture. I'm calling a lawyer next week after we get back from our vacation.

We are in your situation, except almost all our places are held jointly as well. Should we both buy the farm it would be a pain for the relatives, but as long as we go one at a time it should be ok. When my Mom died w/ me as executor 3 years ago the easiest things were the checking accounts and car held jointly. The trust she set up took 2 full years to wind up - and I refused to file tax on the final $30 income in year three. I think as we approach being worm food we may put whomever we trust on as joint owners....

[haha]

Peggy,

What a tough story. It is wonderful that you and your husband are able and willing to step in and help so much.

My thoughts and prayers are with you.

ha

[tryan]

I keep the rentals in my name (or an S corp) for liability purposes. This thread is a bit of a wake-up call (if I were to get hit by the proverial beer truck). Sooo, I am thinking I'll sign a blank check against a rental HELOC ... if I croak, DW can pre-date the check and pull a couple years living expenses to ride thru probate. Or at least until the term life policy pays out.

[macdaddy]

Isn't there a term life component to PMI (private mortgage insurance) that pays off part of the loan in case the loan holder dies?

[Nords]

Right after I reported to my very first duty station, a lieutenant died. Best guess was an allergic reaction to pesticides.

The family's trauma was bad enough. He of course had no will, and he/spouse had side businesses & rental property sprinkled among three states. There was also the litigation surrounding the pesticide manufacturer and its user. The Navy's legal staff were out of their depth from the start so among everything else the widow had to find a pit-bull litigator plus an executor assistant & succession-planning lawyer who could work with cohorts across state lines. Even the funeral was delayed by autopsies & litigation issues. To give an idea of how bad everything was, their litigation & business chaos made the Navy's survivor-assistance & veteran's-benefits programs look flawless by comparison.

A side issue was the psychology of mortality. He was a naval aviator, arguably the branch of the Navy with the highest death rate, but like any Top Gun stud he was also invulnerable & immortal. Cost wasn't a problem-- the military will prepare your will for free.

Luckly maturity & experience trumped youth & ignorance. The morning after the funeral the commanding officer marched the wardroom into a conference room where the legal officer awaited with the will worksheets. A week later we marched back in and signed our wills. That process was followed by the chief petty officers and then the rest of the command...

[tryan]

macdaddy,

You're right but PMI will only pay 20% of the loan.

[peggy]

Quote:

Originally Posted by CybrMike definitely a wake up call. Maybe not appropriate, but how in the world was he murdered in his own home? This strikes me as perhaps the scariest thing!

I only now saw your question, Mike -- sorry. (I don't have to explain that I've been a bit distracted, do I? )

The answer, without going into too much detail, is that he knew the man who killed him. The killer is in custody and has been arraigned -- I'm sure we'll find out more details as the trial progresses.