update on parents and need $ advice on several issues

[WM]

Well, financial issues came to a head suddenly last week with my in-laws - my father-in-law passed away last saturday. He had been in poor health for a long time but of course it's still a shock. Family are all doing well, considering.

DH and I, along with DH's brother, spent last week managing things and getting the finances in order for my MIL. We were surprised to find how out of touch she was with the finances - she really never did anything with their money and so is having to re-learn how to balance a checkbook, etc. She didn't realize, for example, that you can use any credit card at a gas station, not just a Shell card at Shell stations (which was her habit).

The bad news was that there was about 35K of credit card debt, and another 25K of old medical debt - much more than we ever imagined. My MIL feared there was some debt but had no idea it was anything near that amount. The good news is that, according to a couple lawyers we consulted, my MIL is not liable for the debt because it was all in my FIL's name. He apparently knew this and set it up like that on purpose. No other assets were in his name, for the same reason. We will be sending letters to creditors advising them of his death and that his estate was insolvent, but we suspect they might harass my MIL anyway to try and get the money. Any advice anyone has on how to avoid this would be much appreciated.

The other good news was that my FIL had a life insurance policy through work for 50K that goes directly to my MIL (so not available to creditors). After she pays off a couple of debts that she is liable for, she will probably have around 40K to invest. She won't need to touch this money for at least 3-4 years until she stops working, if then. So we could also use some advice on where to put that money. In looking at her monthly income and expenses it appears she will only spend 1/2 to 2/3 of what she makes every month.

One last unknown is that just before we left, DH and his brother found my FIL's credit report from several years ago showing several tax liens from the IRS From initial searching, it appears they are beyond the 10-year statute of limitations for collections, but we also can't find any of my FIL's tax records for 2004-2005, which makes me nervous because he saved everything. We filed their 2006 taxes while we were there so I don't know whether that will open a new can of worms.

Tax issues aside, we felt good that we were able to (we think) get a handle on everything that needs to be resolved. The only other thing I've thought of is that we should pull my MIL's credit report as well to make sure about which credit is in her name. But I would love ideas from anyone here on how to handle any of this. Very happy I have this board to ask for advice!

 

[FinanceDude]

Sounds like a mess..............

As far as credit goes, I think it depends on whether they live in a community property state. Might want to check on that. In community property states, it is my understanding that ALL accounts are considered JOINT, whether they are in your FIL's name alone or not.

As far as the IRS goes........that is trickier. However, I am of the notion that one should NOT contact the IRS and point out things, but rather WAIT until the IRS contacts you if there are issues..........

Good luck.................

 

[WM]

As far as credit goes, I think it depends on whether they live in a community property state. Might want to check on that. In community property states, it is my understanding that ALL accounts are considered JOINT, whether they are in your FIL's name alone or not.

The state is Ohio. We did come across that issue in researching, which is why we consulted two different attorneys. They wouldn't both get it wrong, would they?

 

[FinanceDude]

The state is Ohio. We did come across that issue in researching, which is why we consulted two different attorneys. They wouldn't both get it wrong, would they?

Probably not. They were Ohio attorney's, right?

Still, the creditors will badger you to pay up. I am handling my sister's estate right now, and I am getting badgered by creditors wanting to get paid. My sister was unmarried when she died, so we have the same last name. I even had TWO creditors tell me I was lying when I said I was her brother..............

 

[youbet]

No other assets were in his name, for the same reason.

Sorry to hear of your loss.

FIL actually had zero assets? Name wasn't on checking account or passbook savings account? Name wasn't on the title to the house? A car title? No brokerage account or anything like that? No credit union membership at work? Nothing, na-na, zilch?

I don't know the specific answer, and I hope it all works out OK for your MIL, but it sounds a little too good to be true that all assets are your MIL's and FIL's debt is written off by the CC companies.

OTOH, the amount is relatively small so a few harassing phone calls and letters may be all the CC companies invest in the situation.

Good luck and let us know how this works out.

 

[JustCurious]

You have hit upon a dirty little secret in the credit card business....if someone dies, their unsecured debts die with them, and no one else is liable for the debts, and this includes the spouse (assuming you are not in a community property state and assuming the spouse did not sign for the debts).

The credit card companies know this... but that doesn't stop them from lying to family members and telling them that they are liable, and pressuring them to pay up. Do NOT let them get away with it.

Response to YouBet: It is not too good to be true, it is true. Also, it wouldn't matter if he had millions in his name, so long as the assets passed outside of probate, the cc companies would have no claim on them whatsoever. It's true.

 

[youbet]

You have hit upon a dirty little secret in the credit card business....if someone dies, their unsecured debts die with them, and no one else is liable for the debts, and this includes the spouse (assuming you are not in a community property state and assuming the spouse did not sign for the debts).

The credit card companies know this... but that doesn't stop them from lying to family members and telling them that they are liable, and pressuring them to pay up. Do NOT let them get away with it.

Response to YouBet: It is not too good to be true, it is true.

But if the spouse who incurred the debt died with some assets, such as their name on the title to the house, a joint checking account or brokerage account or whatever, couldn't the credit card company come after that?

 

[JustCurious]

But if the spouse who incurred the debt died with some assets, such as their name on the title to the house, a joint checking account or brokerage account or whatever, couldn't the credit card company come after that?

No, so long as the assets pass outside of probate.  For example, if the husband had a checking or brokerage account and named the wife (or anyone else) as a beneficiary, then she (or whoever is named as beneficiary) gets the money without the need for probate, and any unsecured creditors have NO CLAIM WHATSOEVER.  I know it may not seem right, and you probably don't believe me, but it's true.

A person could have millions in bank accounts and brokerage accounts, and when they die, those assets pass to the named beneficiaries on those accounts regardless of any unsecured debt the person may have in their individual name. And it doesn't matter if they live in a community property state.

 

[youbet]

I know it may not seem right, and you probably don't believe me, but it's true.

A person could have millions in bank accounts and brokerage accounts, and when they die, those assets pass to the named beneficiaries on those accounts regardless of any unsecured debt the person may have in their individual name. And it doesn't matter if they live in a community property state.

Well........ as I said earlier, it does sound too good to be true and I'm really scratching my head trying to think of the catch........ I've never benefitted from a free lunch, so I'm always dubious when something sounds so favorable.

When you say "named benficiaries," DW is joint on our brokerage accounts, so is she the "named beneficiary" as you're using it here? And after my death, she wouldn't have to pay the portion of our joint credit card bill that I signed for?

I mean....how cool is that?? If I have some indication of impending death, such as terminal cancer or something, I'll have to stop paying the CC bill every month!

 

[JustCurious]

Well........  as I said earlier, it does sound too good to be true and I'm really scratching my head trying to think of the catch........     I've never benefitted from a free lunch, so I'm always dubious when something sounds so favorable.

When you say "named benficiaries,"  DW is joint on our brokerage accounts, so is she the "named beneficiary" as you're using it here? And after my death, she wouldn't have to pay the portion of our joint credit card bill that I signed for?

I mean....how cool is that??  If I have some indication of impending death, such as terminal cancer or something, I'll have to stop paying the CC bill every month!

In your case, the "catch" is that you have a joint credit card.  In other words, your wife has also agreed to pay the debts incurred.  Therefore, the cc company would have the right to go after her as a matter of contract law.  However, if the cc was in your name only, then they would not, regardless of how much money you had in any other accounts, so long as she was listed at the beneficiary on those accounts.

You should get a credit card in your name only. That way, if you die, she will not be responsible to pay it, and as long as she is named as the beneficiaries on your assets accounts, the cc companies have no claim on those assets either.

 

[FinanceDude]

You have hit upon a dirty little secret in the credit card business....if someone dies, their unsecured debts die with them, and no one else is liable for the debts, and this includes the spouse (assuming you are not in a community property state and assuming the spouse did not sign for the debts).

The credit card companies know this... but that doesn't stop them from lying to family members and telling them that they are liable, and pressuring them to pay up. Do NOT let them get away with it.

Ok...........I have a real-life scenario for you to comment on. My sister died last August, and I am executor on her estate. She had a large amount of CC debt when she died, and I am being advised that the creditor can put a CLAIM on her personal assets, and force me to sell them to pay off her debts as best I can. Are you saying the CC companies have NO CLAIM on her posessions? Otherwise. why did I have to get an appraisal of her posessions?

Now, I am intrigued.................

 

[JustCurious]

Finance Dude, I will start a new thread....

 

[youbet]

Well that is really interesting JustCurious and I'm really glad you showed up to shed light on this.

We don't have any CC's other than joint right now, but I'll look into that. Our typical monthly CC bill is an insignificant percentage of our net worth, but the concept is still appealing to us frugal types who find free money so attractive. On the other hand.........you have to die to get it

 

[Ibid]

... but we suspect they might harass my MIL anyway to try and get the money. Any advice anyone has on how to avoid this would be much appreciated.

If I was in your shoes, I'd get MIL's phone changed to an unlisted number. Then I'd send a letter to all creditors stating that all communications must be in writing and sent to a P.O. Box (or your address). This way MIL is spared both the nasty phone calls and the nasty letters. Even with the letter, some will still try to call - that's why the unlisted phone number.

You might want to look through the The Fair Debt Collection Practices Act. http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm

 

[bbbamI]

WM,

I'm sorry for your loss. It's hard enough dealing with a death, then having to deal with money matters.

You sound like you have most bases covered. I think the biggest issue is with the IRS, but since you filed the taxes, it will be a wait and see kind of thing.

FWIW, I suggest letting all the phone calls that your MIL receives not be answered and go directly to her answering machine. Creditors will have a recording device. Of course if she has caller id, she could pick up if it were you or some other family member. You might also consider reviewing her mail. You wouldn't want her to sign something that may put her in jeopardy.

Try to take it one day at a time....good luck to you and your family.

 

[JohnDoe]

I would record all conversions then go to the media. Then sue.

 

[WM]

Thanks for the ideas so far.

The checking account was joint, but had minimal money in in when he died, or possibly was in a state of overdraft :. Savings was in MIL's name only, I believe. House and car were MIL alone also. If we lose a little money on the checking account it will be the least of our worries.

I had thought about the unlisted number - would that be effective? Not sure she'd want to change, as she's had the same one for 30 years, but we'll see how the calls go. The answering machine method might be preferable, and we could always get her caller ID if the screening is inconvenient. She has a cell phone, but they wouldn't be able to find that, right?

Unfortunately, no one lives close enough to open the mail for her, but she is relieved to have help on this and I'm confident she'll call if anything questionable comes up. She is quite capable of handling the finances, just hasn't had to do it. She understands everything that is going on, so I don't worry about her signing anything. We will redirect the creditors to a different address, but it wouldn't surprise me if they still sent stuff to her.

 

[WM]

Well, a few months have gone by, and things seem to be under control. This was a lot to deal with, and I want to thank everyone for your help (on this and other threads, sorry for the mess). It made it a lot easier to deal with.

Updates:

1 - credit card debt. So far, so good (knocking on wood with fingers crossed). We sent letters to them all informing of the estate's insolvency, and MIL got a few obnoxious phone calls and threatening letters but nothing like what we expected. It appears that some of them have gone to second-round debt collectors so we're not out of the woods yet. Even AmEx, who initially wanted MIL to pay charges they said were hers, has not been heard from (still knocking on wood) since we sent a letter requesting they prove she owes them the money. I think we got off easier than some here because there was absolutely nothing for the creditors to fight over.

2 - whole life insurance. We settled FIL's whole life policy, and after exploring options for MIL's policy, she chose to surrender the contract and use the few hundred dollars of cash value to pay the taxes she'll owe from a "loan" against the policy. Said loan was generated automatically when FIL stopped paying premiums 15 years ago. So that's a wash, which is fine, and she's happy to be done with them.

3 - IRS leins and uncertainty about whether taxes were paid the last few years. No news is good news (still knocking on that wood)

4 - investing the term life insurance payout from FIL's employer, and deciding what to do with pension options. All settled, going into emergency savings/money market, and a few index funds with Vanguard (IRA then taxable accounts). Moving in steps over a few months, probably completed in the fall. Bonus - discussions with BIL about his investment advisor, index funds, and ER as we compared strategies. He is now a fan of the 4% rule over buying a variable annuity. Next I will suggest he check the cash value of his whole life policy to make sure it's working like he expected.

5 - MIL's financial competence. She is doing great, I am really proud of her. She now has a good basic understanding of how to work her finances and a lot more confidence. She wrote the check for the property taxes this month, which had been a source of paranoia (that she wouldn't have enough to pay them) ever since FIL died.

I think that's everything (it's certainly enough!). DH and I were both right - his Dad was hiding serious financial problems (DH) and everything worked out ok in the end, or so far (me).

Thanks again!