6/20/2012 3:08 PM ET|
When your parents die broke
Inheriting your parents' debt is probably not what you anticipated. The good news is that you may not be legally responsible for it. Here's what you need to know.
Baby boomers and their kids are expected to inherit about $27 trillion in the next few decades, according to the Center on Wealth and Philanthropy at Boston College. Rebecca in Wisconsin doesn't expect to receive any of it.
She's already bailing out a 68-year-old father who spent all the life insurance money from her mother's death.
"I am resentful because he had received a large sum of cash after my mom died eight years ago and blew it all," Rebecca wrote on my Facebook page. "I even gave him my half of the insurance money."
Rebecca has plenty of company. Before the recession, one in seven households headed by people aged 65 to 74 was worth $10,000 or less. Among those over 75, it was one in 10, according to Federal Reserve statistics.
Even those with something now have less. The median net worth of households headed by people 65 to 74 dropped 18% between 2007 and 2010, according to the Federal Reserve's latest Survey of Consumer Finances. For near retirees, those aged 55 to 64, the plunge was nearly 33%.
Many have seen their savings pounded by bad markets and low interest rates. Shriveled home values and spiraling medical costs have also taken their toll. Even living longer than expected can cause a nest egg that once seemed adequate to run out.
The vast wealth transfer to come is a bit of an illusion, anyway. Most of the money will go from the richest families to their (likely already well-off) kids. Even among the affluent, however, fewer parents seem determined to leave an inheritance. A Merrill Lynch survey of people with $250,000 or more in investable assets found only 41% said preserving inheritances was a top concern, compared with 54% in 2009. Far more survey respondents said their top concerns were high medical costs (79%), ensuring their retirement assets would last a lifetime (60%) and being able to afford their desired lifestyles in retirement (55%).
For many people, hopes of receiving an inheritance someday have been replaced by hopes that they won't inherit their parents' bills.
"When my mother died, she had about $100 in the bank, $5,000 in debt, hospital bills and a small whole-life insurance policy that had been borrowed against and was practically worthless," another reader wrote. "I paid for most of her funeral."
The good news is that the younger generation typically isn't responsible for parental debts. But survivors may still have to deal with aggressive collection agencies and expenses from settling their parents' estates. They may have to scramble to take care of a surviving spouse or even dependent children. The family home and other assets may have to be sold. And somebody's got to pay for the burial.
If your parents are among this crowd, you need to know:
- Your responsibilities when your parents die broke.
- How insolvent estates are settled and how to deal with creditors.
- What you can do now to ease the burden later.
Read on for some practical advice.
What you owe when your parents go
Children aren't on the hook for their parents' unsecured debts -- credit cards, personal loans, medical bills -- unless they somehow agreed to take on the responsibility, said attorney Denis Clifford, a co-author of the Nolo Press guide "Plan Your Estate." You'll typically share liability for a debt if:
- You were a co-signer on a loan. A co-signer is just as responsible for paying off a loan as the primary borrower.
- You're a joint (not an authorized) account holder. If your income and credit history were used to get the loan or credit card, you're generally responsible for paying it off. If you were added as an authorized user of a credit card, though, you're not.
- You abused a power of attorney or conservatorship. If you had responsibility for your parents' finances and spent their money on yourself, you're responsible for paying it back.
Michele in South Dakota said that's what her mother did. The older woman drained Michele's grandparents' savings accounts, borrowed against her grandfather's life insurance and racked up $20,000 on the couple's credit cards with "frivolous spending." Then she died.
VIDEO ON MSN MONEY
My step dad passed away this year, and he was 10 yrs younger than my mother. The hospital costs were more than a half million, as he was in the hospital two months. Thank God my mother had the sense to get excellent health insurance, because it is all paid. Now I think, if she has to have medical care, I am so grateful that she has the money saved and invested for that purpose. It's not my money, or money for the grandkids. When someone dies, the greed comes out!!
Parents give life to their kids and support and educate them, where does it say that the kids get what ever money is left over from the parents earnings. Turn 21, leave the house and go make your own money.
It is tough being old and not easy to keep up with inflation and medical expenses. Then there is the simple fact that many parents sacrificed a lot raising their kids and finally want to have some fun.
The biggest priority in every family is.............................paying off your home before you retire.....period.
Never take that second mortgage for anything................unless you want to DIE BROKE.
Here's a different spin, in your last days, prepay for your funeral/cremation, with a credit card. Since the credit card is unsecured debt, according to the aritcle, your heirs are not on the hook for this debt. Take all your money out of the bank, IRA's, 401K's and put it up. Leave a letter to the one you trust the most as to where you have hidden it. Put you car in one of your children's name if it is free and clear. Do the same with all your property , check and see what the statute of limitations are on the time limits to this.
Remember "you came into this world pennyless and naked, it you leave the same way, you broke even".
Stop thinking you are going to live forever, look at the "obits" in the paper every Sunday do the averages of all the ages, it will surprise you on how young people are passing a way.
Using this comment board to Advertise a dating website?.
If you are so lonely, go out and help someone else. There, you might find a partner or companion--Dating Sites are people who present themselves in a Fraudulent Bio.
Here's a template for a Last Will and Testament EVERY Boomer parent should use:
" Being of sound mind , I blew it all while I was alive "
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.