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If someone passes away, can their creditors tell you that you must pay their debts for them (Original Post) DebJ May 2016 OP
It's best you ask a lawyer eom LiberalElite May 2016 #1
Yes I know; I'm going to call in the morning. It's out of state though so I guess DebJ May 2016 #5
Yes. It could all be very different from state to state nt LiberalElite May 2016 #6
You didn't inherit debts. n/t jaysunb May 2016 #2
That's my thought. I've never heard of anyone being asked to turn over the DebJ May 2016 #8
This message was self-deleted by its author Skittles May 2016 #3
Here's more detail DebJ May 2016 #4
Also here in Pa I think we will have to pay 9% in state and local taxes on that DebJ May 2016 #7
You really have to consult a wills & estates lawyer LiberalElite May 2016 #9
Yes it does. But with more Google, now it looks like there is no tax on life insurance DebJ May 2016 #14
Check with a lawyer, but that sounds like what we had to do woodsprite May 2016 #11
Did you and your brother receive checks from the life insurance company? DebJ May 2016 #12
I believe we signed the checks over to the "Estate" so everything was accounted for in that acct. woodsprite May 2016 #20
Oh they will try very, very hard to play on your grief and make you feel nc4bo May 2016 #10
Thanks. No, none of the above applies at all. DebJ May 2016 #13
If your name isn't on the credit cards I don't think so lunatica May 2016 #15
It also depends who owned the policy. If the decedent owned the policy, Flaxbee May 2016 #16
Thanks. It was a term-life policy through an employer. DebJ May 2016 #17
A life insurance policy is not handled the same as assets in an estate. haele May 2016 #18
Thank you. Beautifully said, too. DebJ May 2016 #19
Consult an attorney in your state The Second Stone May 2016 #21
Thanks, See my response #17. DebJ May 2016 #26
Yet another reminder PasadenaTrudy May 2016 #22
Life insurance is usually handled differently than the estate. Hassin Bin Sober May 2016 #23
No. The proceeds of a life insurance policy are not part of the estate. rug May 2016 #24
My Dad died and had a credit card in his name.......... mrmpa May 2016 #25

DebJ

(7,699 posts)
5. Yes I know; I'm going to call in the morning. It's out of state though so I guess
Wed May 4, 2016, 10:35 PM
May 2016

I better call that state.

DebJ

(7,699 posts)
8. That's my thought. I've never heard of anyone being asked to turn over the
Wed May 4, 2016, 10:44 PM
May 2016

life insurance benefits specified for them to the estate of the deceased.

Response to DebJ (Original post)

DebJ

(7,699 posts)
4. Here's more detail
Wed May 4, 2016, 10:35 PM
May 2016

My sister-in-law recently passed away, and named her three siblings as beneficiaries on a life insurance policy through her job.
We received a check already for our portion.

She has no other immediately family; her only child passed away on Christmas Day. 30 days later she had a brain hemorrhage, and after a very painful 6 weeks for our family, she passed away.

She didn't leave a will. We just signed papers for the eldest sister to be the execturess for the estate.
Since there was no will, the sister has to get the court to appoint her as executress, which delays things a bit.

Meanwhile, we are uncertain as to the deceased's debts that she might owe, though access to her bank account was managed just so her mail could be forwarded to this oldest sister. (While my late SIL was unconscious in the hospital, she was supposed to be moving out of her rental home and move in with a friend; so the mail had to be forwarded.) But nothing else was done because it's not legal to do that.

A former coworker and very close friend (more like sister than friend) said there would be a pension and a 401k lump sum distribution, since my SIL worked at Xerox for 19 years. Also, she left behind a 2 year old small car that she originally paid cash for (the poor wonderful woman's fiance had passed away 18 months before she lost her only child on Christmas Day, and she bought the car with his life insurance proceeds).

The eldest sister has asked us to cash the insurance compnay check, then forward it to her, after she opens a bank account "For the Estate Of", and she said she will deposit it there and use it to pay off any of the SIL's bills.

We said okay, a month ago, but now I am thinking this isn't how this should go, or has to go. The eldest sister does need to be reimbursed $8000 for the funeral, and any loss of interest since she took it out of her own savings, adn for the costs of managing the deceased's affairs, but it would seem that proceeds from the pension, 401K and sale of the car should cover that and any outstanding debts. My late SIL only made $47k a year; surely she couldn't owe more than $20k in debt, I would think.


Just curious if anyone has any idea or experience. The eldest sister is very nervous with this responsibility, and I think she's just not aware that there is no reason for us to turn over the insurance paid out. I don't think the debtors have any right to it.

DebJ

(7,699 posts)
7. Also here in Pa I think we will have to pay 9% in state and local taxes on that
Wed May 4, 2016, 10:43 PM
May 2016

insurance receipt; not sure as yet. Since the proceeds we got were $13k, that's a painful chunk of cash we can't afford. Not sure about that yet, but I will try to find out. I'm definitely not willing to turn over the $13k and then pay out more in income tax!

LiberalElite

(14,691 posts)
9. You really have to consult a wills & estates lawyer
Wed May 4, 2016, 10:44 PM
May 2016

unless there are some on this discussion board with the relevant experience. As you have seen it can get real complicated fast.

DebJ

(7,699 posts)
14. Yes it does. But with more Google, now it looks like there is no tax on life insurance
Wed May 4, 2016, 11:12 PM
May 2016

pay outs made directly to beneficiaries. Estate/inheritance taxes may come into play but only if the insurance company received instructions to 'pay to the estate of' the deceased, which doesn't apply here.

woodsprite

(11,854 posts)
11. Check with a lawyer, but that sounds like what we had to do
Wed May 4, 2016, 10:49 PM
May 2016

With my Mom's estate (this was Delaware). Everything went into the estate bank account until everything was settled. The last thing the lawyer (who was a friend) did was dissolve the bank account and write my brother and I equal checks. We each wrote a small check back to the lawyer to cover his fees. He gave us a break because we used him just for guidance and final paperwork. We did all the running around and paper filing that needed to be done.

DebJ

(7,699 posts)
12. Did you and your brother receive checks from the life insurance company?
Wed May 4, 2016, 11:08 PM
May 2016

Or did the insurance company pay the benefits to 'the estate of" your mother?

woodsprite

(11,854 posts)
20. I believe we signed the checks over to the "Estate" so everything was accounted for in that acct.
Thu May 5, 2016, 11:36 AM
May 2016

We were afraid her med and hospital bills and some other items outweighed her estate total. We were surprised that her estate came out a whole 30K of cash to the good at the end of everything. We split everything 50/50. Full estate settlement took about a year, mainly because we were debating how to handle a mortgage she held on a house she had sold to relatives. I found it best to "take over" as mortgage holders and have the payment split between my brother and I. My brother wanted them to refinance so he could get a lump sum of money right away. Doled out in monthly amounts, it added to my brother's monthly income (he has a difficult time managing his money).

nc4bo

(17,651 posts)
10. Oh they will try very, very hard to play on your grief and make you feel
Wed May 4, 2016, 10:44 PM
May 2016

That paying the debt was your love one's last wish and in order for you to not feel guilty ruining your deceased loved one's credit, you need to pay up even if the life insurance policy has you listed as the only beneficiary.

My mom had a will. Her life insurance policy was not a part of the will. I was the sole beneficiary. She did not order in the will that the insurance money be used to pay off her cc balances.

Her credit cards were in her name alone. I had 0 responsibility to pay off her debt even though the bastards did all the above to try to get me to do so including making an offer to only pay off a percentage of her cc debt.

Be extremely careful if the loved one is a spouse or you were a co-signer, way different outcome if I'm not mistaken.

Evil, slimy tactics are not beneath these people. Get professional help before doing or saying ANYTHING to the cc company or any business that holds the debt!

Just my experience like someone upthread mentioned, contact a lawyer!!!

DebJ

(7,699 posts)
13. Thanks. No, none of the above applies at all.
Wed May 4, 2016, 11:09 PM
May 2016

She didn't have a will.

I don't even know that she HAD any creditors, at this point.

We've not had contact with any she might have and no reason to believe we would ever have
been used for a reference to obtain credit.

lunatica

(53,410 posts)
15. If your name isn't on the credit cards I don't think so
Wed May 4, 2016, 11:26 PM
May 2016

It won't stop them from trying though. They intimidate people into thinking they have to pay the deceased person's debts. Just remember that they are ruthless, greedy and bottom feeders.

If you can't afford a lawyer, talk to a paralegal which will cost you a fraction of what lawyers charge. That's what I did when I declared bankruptcy. At least here in California they can't make you pay for another person's debts.

By the way, I declared bankruptcy and did all the footwork, filing and going to court by myself with only the initial help of a paralegal.

Flaxbee

(13,661 posts)
16. It also depends who owned the policy. If the decedent owned the policy,
Thu May 5, 2016, 02:17 AM
May 2016

there might be some claims. If the decedent received any sort of health-and-welfare coverage, the state/feds will try to get that money recouped from the proceeds of the policy. Do see a lawyer. I don't know about credit cards, etc. Definitely depends on the type of creditor.

In general, it is a good idea for the recipients to be the owners of the policy, and that ownership be transferred from the insured to the recipients WAY, WAY (as in, 5+ years) before the possibility of death of the insured (obviously, this isn't always possible bc anyone can get hit by a bus, but in 'normal' lifespan calculations).

DebJ

(7,699 posts)
17. Thanks. It was a term-life policy through an employer.
Thu May 5, 2016, 03:58 AM
May 2016

So she didn't own it outright, but since she had a provision where she could change the beneficiaries or most likely also cancel coverage, that is considered as having some type of ownership-oriented provisions or some such legalese.


We are sending a letter to the sister in law who will be the administrator of the deceased SIL's affairs, and asking her to have the attorney she has retained to assist in these matters 'review and advise'. Told her to just mail it to him or drop if off, no point waiting to sit in his office, nor sit there while he looks stuff up. Every attorney I've had to use billed by the partial minute, and that would only possibly increase the expenses.

There's no way I'd attempt to explain this to her on the phone; she has NO idea at all of any type of tax implications. One of the many who pay someone to do her taxes year after year, though they have been the same for over a decade just filling in minor differences in numbers. That's all she knows.

From what I see, if we give the money to Debby's estate bank account, then that becomes part of the estate, even though the insurance policy was set up to pay beneficiaries, and NOT set up to be payable to the estate. That is, the funds are NOT intended a) to be subjected to the demands of creditors, b)to be subjected to New Jersey Estate Taxes, becasue they are not part of the estate, from my comprehension, when the policy is paid to beneficiaries, and c) in Pennyslvania, I found out, there is NO tax on life insurance policy benefits paid to a sibling upon the death of a sibling...but if we instead only end up getting these funds by 'laundering' them through her estate bank account and proceedings, then the funds WILL be taxable or viewed as taxable and reported as taxable because that would be getting funds through the pay-out of an inheritance on an estate, and that tax rate is 12 percent when inherited from a sibling.

Man, Pennsylvania sucks for the little guy. If you own a business here, but incorporate next door in Delaware, that business pays NO income taxes to Pa. And Fracking of course, comes at a discount here for the poor little old oil companies, compared to every other state. But if middle class or lower class John dies and leaves his sister Betsy even like 2000, Pennsylvania rushes in to take 12 percent...which is DOUBLE the state income tax rate. Once I get all this confirmed, I'm going to make phone calls ot Harrisburg like the old lady with time on her hands that I am. This is ridiculous!

On edit: and it doesn't matter how small the 'inheritance' is, even if its ten dollars, PA gets its 12 percent. There is no minimum/maximum. Every single darn dime is taxed. Just like filing our regular state income taxes, the Flat Rate NOT FAIR tax system. No breaks at all. Income times 6 percent, no matter what. God how do people on minimum wage survive at ALL around here? (Obviously this isn't my home state.........)

haele

(12,581 posts)
18. A life insurance policy is not handled the same as assets in an estate.
Thu May 5, 2016, 04:02 AM
May 2016

Every state handles estate assets and debts differently, but unless it's a life insurance policy on a bank account or to the estate itself, or for specific events (such as funeral expenses or specific debt reconciliation/payoff) most insurance policies are money set aside specifically for the beneficiaries or intent of that policy separate from all other assets that belong to the person who has passed.
For instance, if there's a life insurance policy added to the insurance required for the mortgage for a house in the estate, it's to pay off the mortgage should something happen to home owner, not his/her credit cards, Medicaid, or student loan debt. The estate may have to sell the house to pay off debt, but the life insurance on the mortgage was only to satisfy the bank's lien on the estate for the terms of the mortgage.

As for a life insurance pay-out - depending on the state and the amount of the policy, you may still have to pay tax for to the disbursement of the policy, but the rest of the money should be free and clear.

Been through this five times with estates in different states - one included international assets, and that was a pain...but the handling of life insurance itself during probate was pretty much the same no matter where the probate was being executed. I've been both executor and beneficiary.

The most important lesson I learned is that the executor of the estate needs to get a lawyer to handle disposition of the trust, the assets, debts, possible liens, and other legal claims during probate - and that all the beneficiaries should be part of the probate process, to ensure there's equal representation and consideration to some degree. One can't just trust the account holders and the courts, and figure that if everyone in the family is in agreement, that's all that's needed to get through probate. Whether they participate as a group or as individuals, the executor and beneficiaries both need to have a lawyer.

Haele

DebJ

(7,699 posts)
19. Thank you. Beautifully said, too.
Thu May 5, 2016, 04:13 AM
May 2016

See my response to the post above yours.

This is really a simple estate. She owned nothing except a vehicle, rented her home, and we had to move her stuff out of her home while she was unconscious for six weeks before she passed away. Her stuff is at a friend's house, and nothing of value except perhaps her grandma's bedroom set which is over 100 years old.

Her income wasn't even enough for her to qualify for an apartment in Jersey at a nicer place (she was in a place she had rented together with her fiance, who passed away two years earlier, but she stayed there after he passed), so whatever debt her estate might have, it can't be too much at all...it would have been unsecured debt (except if she took out a loan later on the car..but that should still be a wash financially, at worst, once sold, it was in good shape).

 

The Second Stone

(2,900 posts)
21. Consult an attorney in your state
Thu May 5, 2016, 12:17 PM
May 2016

there are rules, but the whole situation needs to be reviewed by someone with knowledge of your jurisdiction. I'm a lawyer, but do not practice probate law. Please see a lawyer.

Hassin Bin Sober

(26,272 posts)
23. Life insurance is usually handled differently than the estate.
Thu May 5, 2016, 02:04 PM
May 2016

The life insurance is designated by contract to the beneficiary. In other words, it doesn't go through probate. It is your money by contract. Debt collectors have no claim.

Other assets like regular bank accounts and real estate have to go through probate. Even then, the creditor can't collect once the funds are disbursed through probate.

If the creditor had any claim, they would have asserted it through a claim/lien.

When my dad passed, I told my brother to keep his mouth shut and let the lawyer handle things. But big mouth took it upon himself to tell everyone that dad died. It made things harder for our attorney. Rather than just pay the Discover bill we would have paid anyway, we had to satisfy the claim placed on the estate by Discover. There was also a checking account that we were signers on that should have been as easy as just writing a check - it was legally our money. But Chase locked up the account.

Also, 401k money was distributed by contract and didn't have to go through probate.

Keep in mind a debt collector will say anything to get you to pay. If they had a legal claim, it would be made by now. It took Discover about 10 seconds to make a claim on our estate.

mrmpa

(4,033 posts)
25. My Dad died and had a credit card in his name..........
Thu May 5, 2016, 09:59 PM
May 2016

with a little over $1000 owed on it. They wrote a letter to my mother stating that she was responsible for the bill. She wrote a letter and told them, as her name was not on it, she did not owe them the money.

My brothers and I got a letter from the company, stating that we should pay my father's debt and restore his good name. We wrote a letter to them and basically said 'fuck' off.

It's a debt only owed by the person whose name is on the debt. If his/her estate goes into probate, they could make a claim. But they can't make a claim on an insurance policy where the debtor is not the beneficiary.

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