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For many people, hopes of receiving an inheritance someday have been replaced by hopes that they won't inherit their parents' bills.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
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.
Yes, retirement is not a picnic for the majority of Americans.
Most have not prepared for retirement, When starting work young, they should start saving for Retirement. Everyone.
It is sad to see the children of these parents that have passed away. Many, blow their retirement money on gambling, extensive, expensive vacations, and just daily life, which cannot be avoided.
There is little fun being retired, when your family has moved away, friends pass away, your own adult children pay no attention to you. That is why money at this time in life is freedom for them.
After parents have passed away, bills needed to be paid, possibly huge credit debts; they can claim Bankruptcy. The owned house is taken away by the Declaration of Bankruptcy. Owning a home is no longer considered an Investment.
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.
Most american kids are spoiled brats if you ask me. I am glad I chose to have no kids and i think many of you should have made that choice, too !!!! You gave everything to your kids and look how they treat you, when you're old !! I would not leave them, anything ! I would give what you have to animal shelters because animals would treat you much better !
French people have savings, especially the elderlies... the very large majority of people in france, especially among the elderlies, own their homes free of debts ! My parents always paid for their homes and cars, CASH ! They never had a debts in their lives and they tought us to live within our means which we all did. Now 2 of my sisters own their homes free of debts.
America is going straight into the wall and it is into my eyes and the eyes of most europeans, becoming a 3rd world country..
We now call it, america, the medical misery !
Debt is like IOUs as long as there is a legally reasonable possibility of repayment it can be traded as a thing of value. Just think what will happen to the economy when most of the baby boomers die in debt and all of the trillions of dollars in paper "value" suddenly vanishes form the system and it's markets. Talk about a bubble! Trillions in uncollectable hospital bills to pass along to the taxpayers and paying patients and insurance companies will radically raise the cost of living and consequently lower the standard of living for the survivors. This is the all the result of not thinking ahead.
When the hospitals and insurance companies threaten to go bankrupt the good ol government will step in and bail them (too important to fail boys) out to the tune of tens of Trillions of dollars. Welcome to financial slavery for the workers that are left to repay all of that debt back (with interest) in ever increasing taxes for ever decreasing government services.
All of this could have been avoided by looking ahead and changing the broken system. A few people are massively profiting by keeping things as they are. They will jump ship as the Titanic USA sinks (laughing all the way to the offshore bank) leaving the rest to foot the bill.
If I were by some chance your kid, I'd never talk to you again...AFTER telling you to keep your money and if any is left, it can rot in the ground WITH you! See how much heaven you can buy with it......and if you don't believe in heaven, then I guess it can burn....right next to YOU, in the "other place".
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