Hello everyone - My mother-in-law passed away two days ago, and in addition to funeral expenses, we are going through other documentation and trying to figure out what to do with my wife’s surviving father. All the bills were in her name because my father-in-law has terrible credit, and for what I can only describe as superstitious/religious reason, they did not have a will. The house still has a mortgage as well, and the title was also only in her name because to get a better refinancing rate, she was told to leave him off. I should also add that my father-in-law is somewhat elderly (75) and not in great health himself. He is also not technology savvy, somewhat non-trusting, and is not very good at dealing with things like bill collectors. Assume for the sake of argument that he is like a child. He is also not a native English speaker and is about 75% deaf, so assume we will have to take care of most everything for him, other than him being able to still drive himself to his own medical appointments. There is no dementia or mental illness, but he does use a walker and has had some minor strokes that affect his muscle control.
So far, we have transferred over his Verizon cell phone account to our own at minimal cost, and I’m sure that there are several questions that will come up in the next few days I’ll post here, so I thought I would open a thread on this. If this has been asked before, please link me to that thread as I would love to read it.
My first question is in regard to discharging debt. I know we need the death certificate to close accounts, which we will get shortly and we already know to get numerous copies because some businesses demand an original. The in-laws had little or no savings, so my wife has taken out a $20,000 loan against her 401(k) to deal with some of these problems. My question is, in California (where they live), are there any debts that are forgiven? As in, if she had an American Express card with a $2,000 bill, does it necessarily fall on my father-in-law, who was never associated with the account, to pay for it? I assume we must, and I assume if you ask the company owed the money, they will say “yes”, but I don’t know the law and if that is true. I want to know if there are any debts that are effectively wiped clean in death.
California is a community property state, which means your FIL is probably liable for his wife’s debt, even if he was not named on the account. But don’t take my word for it. The best thing to do in this situation is to hire an estate lawyer to clean everything up.
I’d also look into a whether it would be possible for your father-in-law to get out from under the debt by filing bankruptcy. I don’t know how much equity they had in the house, but if he’s under water on it and with a lot of other debt your wife may end up borrowing from her 401k to delay the inevitable. I’m assuming that neither she nor you are co-signers on this debt.
Nobody has to assume your MIL’s debts, including her husband. Inform her creditors of her death and except for secured creditors (i.e., mortgagees), they should all go away.
Generally, spouses automatically inherit, however, the rules may be different if they are not both on the deed. There is also a “homestead” law in CA which may protect some of the equity in the house.
I vote for this, especially when there is no will and there is property (and a mortgage) that will be transferred. Even if your father in law is not liable for the balances on the charge cards, your mother in law’s estate very much is. If not paid, they are allowed to put a lien on the house.
Some cards and loans allow holders to purchase insurance that will pay the balance off in the case of death or disability. Not many people are willing to pay the monthly fee, but you might want to check for it.
I hate to say this, but if he has trouble walking, has had minor strokes, and has trouble with muscle control, he’s really not a good candidate for driving. He control of the car isn’t going to improve and it’s going to deteriorate slowly enough that he’s not going to notice it.
I don’t know where you live, or if there’s a service for driving to medical appointments in your area, but if there is, this is a good time to try to get him used to using it.
Well, it’s all fine and dandy to say “hire a lawyer”, assuming these people aren’t just going to swap any savings in debt with equal or larger debt in the form of billable hours, as if this is something cheap and simple. I want to get the most out of that $20,000 loan and the funeral expenses are going to eat a good chunk of that (especially since we also purchased what we’d need for my father-in-law at the same time for side by side graves.) I might opt for a consultation and see what they can do, but it would be great if there was a link someone could point to in the California code saying “you can (or cannot) discharge debt in California under the following circumstances…”. Then I could carve away at the problem and do the more routine things myself, leaving a lawyer for the more critical things. I was hoping someone like Bricker, or one of our other resident lawyers, might chime in if they have any expertise in this area of the law.
I figure I’m out of luck with things like credit card debt in a community property state like California and we’ll just have to pay it. Thankfully, American Express gives you 24 months interest free to do so (as stated on their website), but I don’t know about other things.
Ultimately, my hope is that even without a will there will be a way to 1) get the title to the house transferred to my father-in-law easily, 2) sell the house, and 3) use the proceeds of any equity to pay all her (and his) debts and have him live with us or my wife’s other sisters in town for his own remaining years.
The first sentence is true, the second sentence is hogwash. The debts of MIL are now debts of her estate. Her debts must be paid from the sale of her assets before any asset can be distributed.
One thing to consider is since his credit is already shit, it probably won’t get too much worse by shining all the bills on. His situation doesn’t sound like a long-term thing, if you get my drift. In California, the foreclosure proceedings might take longer than he’s gonna stick around.
Not an ideal solution, but a solution. Certainly cheaper than a lawyer.
Some of the above is accurate, and some is not. Joint debt is the responsibility of the surviving debtor.
For the secured debt, generally whomever takes possession of the secured assets will be responsible for the debt. No other person is responsible for the payment if they do not take possession of the secured asset - the lien holder simply seizes the asset in lieu of payment. CA is a non-recourse state, so the only risk exposure is the asset itself.
For unsecured debt in CA which is a community property state, the surviving spouse is likely responsible for the unpaid debts. I believe this is stated in CA Probate Code Section 11444(b)(3) and (5).
Bankruptcy is an option but may not be necessary if the surviving spouse has little to no assets. Things like some retirement accounts and social security benefits cannot be garnished so the protections provided by bankruptcy may not be necessary. The local Bar Association will likely schedule a free 30 minute consultation which I recommend you take advantage of.
Some lawyers will let you do some basic tasks yourself (contacting people, etc) and mostly just provide advice. This sort of lawyer would not be prohibitively expensive and as mentioned would probably pay for itself.
I was told that the homestead exemption for bankruptcy in CA in 2013 was 175K.
Up to that, the court will not attach a primary residence.
If he can’t duck the debts (a google of “survivng spuse california debt” will get you started), a chap 7 would not hurt an already crappy FICO. Just make sure the mortgage is in his name before filing.
A bankruptcy will cost about $1000, paid in advance (the lawyers ain’t stupid).
As I pointed out, this isn’t necessarily true, since California is a community property state. Spouses are responsible for each others’ debts (which occur during the marriage) even after one dies.
In Wisconsin if someone doesn’t pay their bills the debtor can legally go after the spouse. I could be wrong but I assume that would count if they die as well. Also, don’t forget, if FIL stops paying the mortgage, the house will be repo’d.
This reminds me of something in my family. My cousin’s mom had cancer, her dad set up an auto payment to take care of the bills and made an agreement with them for some measly amount like $100 a month. He won’t live to see them paid off. I reminded her (my cousin) that when her dad gets close to the end he needs to turn off the auto-payment and just start writing checks AND, after he dies and they stop getting paid she WILL get calls about it. They’ll tell her that she’s responsible, they’ll guilt her into paying for it, they’ll put her (now/then deceased) father in collection who will call and pester her, but she has to stay strong and remember that her mom’s medical bills are not her’s, legally or morally. Just ignore the calls, tell them mom/dad died, ask for proof, in writing, that she owes the money and tell them they can suck an egg.
The reason I mentioned turning off the auto-pay is that so as soon as he dies, they can’t continue to draft payments from his account.
So just keep that in mind, when he goes, YOU (or any other siblings or family members) don’t owe anything for bills that he’s racked up.*
Regarding the house, I don’t know if they’ll let you just move it to his name. You usually have to refi to do something like that. I had to do a refi just to take my ex-wife’s name off of my mortgage. If your credit allows, you could look into moving it into your name and getting an ARM/interest only loan. That’ll keep the payments very small and it’s designed for people that are planning to sell the house soon.
Of course you can also tell him that you’ve used up the 20k digging him out as much as you can and if he can’t transfer the loan he might have to move into an apartment or ask one of the other siblings (if there are any) for help.
*Come to think of it, I wonder how often people use that to their advantage. They know dad is going to die any day now so they charge things to his credit card so they’ll never have to pay for it. Of course, the CC company will go after the estate, and they’re not stupid, so seeing $3000 worth of purchases at Best Buy two days before he dies and some digging says he was in hospice during that time, they probably won’t be happy about that.
TL;DR, he’d probably responsible for her bills, but you aren’t and don’t let them think you are (unless your name is listed on his accounts or hospital bills).
I think you need to talk with a lawyer here. As I understand it, your in laws are responsible for that debt to the extent that THEY have assets to satisfy them. You are not responsible for those debts, nor are your assets available to the creditors.
Take part of that 20 grand to a lawyer before you do anything else.