Debt after death: Banks chase down mourners

[IamOld]

Right Ladyinthered (I actually deal with this for my job...long story) - any community property state is...difficult. ANd you're right - it would have to be an irrevocable trust.

LIFE INS if left to the beneficiary, is never open to the claims of creditors to the estate, because the ins co pays directly to the beneficiary, it never becomes property of the estate...again community prop states may be different...

I don't know about other states, but that is not true in California. If a trust is revocable at the time of death of the settlor, the settlor's creditors can go after a decedent's trust for payment of debts if the probate estate does not have sufficient assets to pay the debt. It can be a lot of trouble, especially if there isn't already a probate and the creditor has to open one in order to go throught he claim process. But, it can be done. Just because there is a trust, doesn't always mean there is not a probate estate and you don't need assets to open a probate.

Also, if somebody inherits a decedent's assets outside of a trust or probate, they can be held liable for the decedent's debts up to the amount of the assets they receive. Of course, the creditor has to know about the inheritance to go after it.

The only way for somebody to be certain that their unsecured debt dies with them is to either give all of their assets away during life or put them in an irrevocable trust for somebody else's benefit. It may be possible to create an irrevocable trust in which you are entitled to income only and keep it out of the hands of creditors. But, you'd have to be able to live off the income. Even if you can, the transfer of a substantial protion of your assets to a trust in which you retain control of the assets or any benefit could be considered a fraudulent transfer.

This is my understanding of California law on this topic. Other states laws will vary, but I suspect at least some have similar laws. It just shouldn't be that easy for somebody who has assets to run up unsecured debt that will die with them.

Anybody who wants protect their assets from creditors after their death should consult an experienced estate planning attorney.

None of this is any excuse for creditors to try to collect a decedent's debts by implying to family members that they are liable to pay the debts when they aren't. I've seen letters attempting to do that and they disgust me.

[LadyInTheRed]

and if you have a trust you can bypass this whole thing and the estate when the person dies will have zero $$. There is no estate to assume (assuming no community property and no joint ownership/loans)the estate has no assets.

I don't know about other states, but that is not true in California. If a trust is revocable at the time of death of the settlor, the settlor's creditors can go after a decedent's trust for payment of debts if the probate estate does not have sufficient assets to pay the debt. It can be a lot of trouble, especially if there isn't already a probate and the creditor has to open one in order to go throught he claim process. But, it can be done. Just because there is a trust, doesn't always mean there is not a probate estate and you don't need assets to open a probate.

Also, if somebody inherits a decedent's assets outside of a trust or probate, they can be held liable for the decedent's debts up to the amount of the assets they receive. Of course, the creditor has to know about the inheritance to go after it.

The only way for somebody to be certain that their unsecured debt dies with them is to either give all of their assets away during life or put them in an irrevocable trust for somebody else's benefit. It may be possible to create an irrevocable trust in which you are entitled to income only and keep it out of the hands of creditors. But, you'd have to be able to live off the income. Even if you can, the transfer of a substantial protion of your assets to a trust in which you retain control of the assets or any benefit could be considered a fraudulent transfer.

This is my understanding of California law on this topic. Other states laws will vary, but I suspect at least some have similar laws. It just shouldn't be that easy for somebody who has assets to run up unsecured debt that will die with them.

Anybody who wants protect their assets from creditors after their death should consult an experienced estate planning attorney.

None of this is any excuse for creditors to try to collect a decedent's debts by implying to family members that they are liable to pay the debts when they aren't. I've seen letters attempting to do that and they disgust me.

[IamOld]

I'd say I'm suprised, etc., but that would be a lie. The financial banksters are out for blood - period.

Hopefully good lawyers who handle wills, etc., will tell the family of the deceased to tell these folks to go pound sand.

Life insurance (unless you have complex estate issues) should NEVER be left to the estate but to your beneficiaries...and if you have a trust you can bypass this whole thing and the estate when the person dies will have zero $$. There is no estate to assume (assuming no community property and no joint ownership/loans)the estate has no assets.

[IamOld]

no family member is legally obliged to pay a dead person's debt. The debt dies with him/her. The exception of course is the community property state. That is true as the debt is common in that denominator. This article is about the "sickest" thing i have read/heard of our banking system. The more i learn about the banking system more i get disgusted with it. As a matter of fact, not wishing to bk on any card, i now in retrospect, 'chuckle' about sticking them. I had no intent to do that as i of free will used their money. I would and had paid loyally until my bust. My credit score on the day of bk was 820. I don't know what it is now, nor will i ever look. Cash only is my only way of life. 'hub

here, here!!!!

[AngelinaCatHub]

Another story in the this vain of bankers.

My ex-wife whom I lived with for 23 years, and we are still friends, told me this true tale: She started bouncing checks. She had solvency and there was not reason for her account to be closed. She brought herself into her bank. The clerks and one officer turned white as sheets. As she asked what was with her "closed account"? They said, "You Ma'am are dead. She said what???? They showed her the newspaper obit with HER NAME, her date of birth and her township. It was an unbelievable but true coincidence. She asked, did you check the undertakers death certificate for a SS#? Of course they did not. She said I assume you will make all those checks good, write a letter to each of the merchants an explanation and open my account." The head VP stated "no we will not, as it is not our fault". She said you will or I will go to the papers and legal. They did restore all charges with the letter as well as make good her account. Once this was done, she pulled her account to another bank.

This is not a joke. Imagine reading your own abit in the morning newspaper. 'Hub

[AngelinaCatHub]

No family member is legally obliged to pay a dead person's debt. The debt dies with him/her. The exception of course is the community property state. That is true as the debt is common in that denominator. This article is about the "sickest" thing I have read/heard of our banking system. The more I learn about the banking system more I get disgusted with it. As a matter of fact, not wishing to bk on any card, I now in retrospect, 'chuckle' about sticking them. I had no intent to do that as I of free will used their money. I would and had paid loyally until my bust. My credit score on the day of BK was 820. I don't know what it is now, nor will I ever look. Cash only is my only way of life. 'Hub

[justbroke]

Yes there are some collection tactics which try to get the non-debtor to assume the debt. I received a call about 3 months ago for my dead brother's account. They didn't even know that he had died; or, they did know and were trying to trick me. In any case, I simply stated that he was dead and that I would not be discussing "his" finances with them. The call ended on that note.

[ttg1]

Did you even bother to read the article dear Flamingo?

It then offered her or another family member the "opportunity" to assume the balance on her mother's credit card and offered a special introductory APR of 0% for the first six months (the APR would increase to 13.24% after that).

This isn't about the estate. It's about creditors trying to trick innocent third-parties into taking over debt they do not owe. This happened when my father died. My mom got phone calls within a week telling her that she owed the debt. Not the estate. My mom. The only reason that this is being offered as an "opportunity" is because it's in writing. But the intent is the same.

Thankfully, my mother mentioned it to me and I set her straight because she was about to send them money from her personal account.

Most people in their wills list a general clause that instructs their executor(rix) to pay all debts owed by his/her estate as soon as possible after death

.

This is true but proper estate planning should be able to avoid paying most if not all general unsecured debt such as credit cards.

[Flamingo]

Creditors want to ensure that whoever is the executor or executrix (they know they are usually relatives) are aware there is debt so they want to ensure everyone is informed in any way possible as estates can take a long time to close out. Most people in their wills list a general clause that instructs their executor(rix) to pay all debts owed by his/her estate as soon as possible after death. What people need to do is educate themselves as much as possible about the probate and estate laws in one's state because sooner or later, most people are responsible for someone's estate.

[HRx]

By Blake Ellis September 1, 2011: 2:36 PM ET

Denise Townley was "incensed" when her her mother's credit card company contacted her only 13 days after her mom passed away.

NEW YORK (CNNMoney) -- Nobody wants to remember a deceased family member by the debt they left behind, but many creditors certainly make it difficult to forget.

Denise Townley was appalled when she received a letter from her mother's credit card issuer less than two weeks after her mother passed away.

"We have recently learned that [your mother], a valued Discover Card customer, has passed away. Please accept our sincere apologies," stated the letter from Discover, which Townley sent to CNNMoney.

It then offered her or another family member the "opportunity" to assume the balance on her mother's credit card and offered a special introductory APR of 0% for the first six months (the APR would increase to 13.24% after that). If Townley wasn't interested in taking over the account, then the bank wished to discuss how the estate planned to pay off her mother's credit card balance.
Confessions of former debt collectors

Confused and concerned that she was on the hook for her mother's debt, Townley called Discover. When she asked a probate specialist there how they knew her mother had passed away, she was told that Social Security furnished the information.

"I find this not only ethically abhorrent, but also irresponsible and insensitive on both parties' parts," said Townley.

But while it may be "ethically abhorrent," it's not illegal. Banks are within their rights to seek payment for debts owed by a deceased borrower, and the estate is liable for the debt if it has enough money.

"We understand that settling the affairs of loved ones is difficult," a Discover spokesman said. When contacting family members about the unpaid debts of deceased card members, Discover states upfront that payments on behalf of a deceased relative are voluntary, not required, he added.
How soon is too soon?

Financial institutions typically receive notice of a person's passing from the Social Security Administration within a month or two, according to a recent review of the agency conducted by the Social Security Administration's Office of the Inspector General. Yet, in some cases, banks find out even earlier than that.

Because it's likely the deceased carried multiple debts, creditors often race to be the first to collect money from the next of kin or the estate before it has all dried up, said Gerri Detweiler, a debt specialist at credit card research and comparison site Credit.com.
Hey Social Security, I'm not dead!

"The longer a creditor waits to get paid, the less their chance of getting paid," she said. "And unfortunately, they may find that it's easiest to elicit payment when bereaved relatives are still trying to sort everything out."

During her husband's wake, Deborah Crabtree said she had set up an answering machine and put it on speaker phone so that loved ones could leave their condolences, according to the complaint she filed against Bank of America.

But instead of hearing only the voices of friends and family come through the speakers, she said a debt collector from Bank of America Home Loan Servicing called every 15 minutes and left harassing messages about the debts her husband had left behind that everyone in the house could hear.

Even after the wake, Crabtree said Bank of America collectors called her as many as 48 times a day -- and even threatened to foreclose on her home, according to a lawsuit she filed last month against the bank.

Crabtree, who lives in Honolulu, said she had told the bank that she would pay the debt as soon as she received her husband's life insurance check. However, the agents told her that since the calls were computer-generated they couldn't stop them until the debt was paid.
Extreme debtors

Crabtree's lawsuit claims that Bank of America violated state debt collection laws. Her lawyer, Gary Shigemura, said the bank has not yet responded in court.

For its part, Bank of America declined to comment on the particular case, but a spokeswoman said that in general, the bank informs family members when they aren't responsible for the debt of a deceased relative.

The Federal Trade Commission recently declined to impose a "cooling off" period after a death, during which creditors wouldn't be allowed to go after a debt.

The FTC said it was unnecessary, since its rules under the Fair Debt Collection Practices Act already prohibit third-party debt collectors from collecting debts at "inconvenient times" and harassing customers.

Yet, the FTC only governs third-party debt collectors, not the banks -- which are regulated by individual states. And while many of the states have laws similar to the FTC's, the terms "harassment" and "inconvenient times" can be interpreted very differently by consumers and creditors, said Detweiler.
Do you owe money for the deceased's debt?

Often mourners don't have enough time to grieve their loss, let alone assess the debts owed by the deceased -- and whether or not they're on the hook to pay for it.

Some debt collectors make family members feel responsible for debt owed by the deceased by asking them questions about whether they were the one who paid for the funeral or took care of other business related to the person's death, said Detweiler.

"They don't necessarily state that you are liable for the debt, but they blur the lines to make you feel like somehow you are responsible for it, even if it's just a moral responsibility," she said.

Most people won't have to pay for their deceased family member's debts unless they co-signed on the loan or it is a debt from a joint account. However, those who live in community property states, where property and assets acquired during a marriage are considered jointly owned, are liable for the debt, said Detweiler.

"If you don't think there's a reason you should be legally liable, you'll need to look at money in the estate -- but don't start payments until you figure out whether there's enough money in there to pay it," she said.

As the executor of the estate, you can request the credit card balance of the deceased's account. Under a provision of the new CARD Act, the issuer has 30 days to provide the balances and can't charge any penalty fees or interest if you or the estate pays off the balance within 30 days after it provides that information.

If the estate doesn't have enough money in it to pay the debt, the creditor is often out of luck.

First Published: September 1, 2011: 12:55 PM ET

http://money.cnn.com/2011/09/01/pf/debt_death/index.htm?&hpt=hp_c2