By law, the mother's estate was responsible for paying the money back -- except Michele's mother died in debt. Collectors went after her grandfather, but he was essentially broke, too. Dealing with the collectors took its toll on all concerned.
"I am not bitter about my mom anymore. . . . I am sure the stress from the debt caused her heart attack. However, I am the steward of my grandfather's money and care, so I need to manage this debt mess and continue paying his long term health facility," Michele wrote. "I am a little overwhelmed."
Her troubles may not be over when her grandfather dies. A growing and lucrative market for old debt has led some collection agencies to pursue credit card bills even after an insolvent person dies.
One of my readers told me a collection agency insisted he had a "moral obligation" to repay his father's debts. If this happens to you, take a moment to savor the irony of being lectured about morals by a clearly unethical collector. Then hang up.
However, secured debts -- loans that are attached to an asset such as a house or a car -- are a different story. Those payments must be made, or the lender can take the asset. If your folks had any equity in a home or car, finding the money to make the payments may need to be a priority.
(By the way, if a surviving spouse is still living in a home, some or all of the equity may be exempt from creditors' claims, depending on state law. Otherwise, the house may need to be sold to pay debts.)
Also, if you're executor -- the one in charge of settling the estate -- you have a responsibility to find and inventory all debts and assets. Tax forms, bank statements, credit card statements and checkbook entries can give you clues where to look.
Then you must notify creditors, banks, brokerage firms and others of the death. (Read "What to do when someone dies" for an overview. For a more complete list of an executor's duties, check out a primer such as "The Executor's Guide," another Nolo Press book, by attorney Mary Randolph.)
What you shouldn't do, Randolph said, is rush to pay off the bills until you have a solid idea of your parent's entire financial picture.
"A mistake people make is they pay off things too quickly," Randolph said. "A credit card bill comes in and they pay it, not realizing there won't be enough money in the estate to pay for (higher-priority bills) like funeral expenses or medical expenses."
Another mistake: counting on life insurance or retirement accounts to cover the debts. These assets typically have designated beneficiaries; if that's the case, the money goes directly to those people without passing through probate or other estate-settling processes.
The beneficiaries of these accounts "walk off into the sunset," said Pasadena, Calif., lawyer Ruth A. Phelps, a certified elder-law attorney and member of the National Academy of Elder Law Attorneys. "That money is not subject to creditors' claims."
