Generally, when a person dies, only their estate can be tapped for existing debts (the standard form for a Will makes clear that debts come before heirs).
CA is a community-property state; the spouse is (usually) responsible for the other’s debt (only if the debt is incurred during the marriage).
Under no circumstance does a child inherit a debt. Unless you are a signatory to the debt instrument, it is not yours, and nobody can make it yours.
Some mortgages used to be “assumable” - a new owner’s name can be substituted for the original mortgagee. This was intended to facilitate sales to a new buyer. The assumable loan generally died in 1982 (when new mortgages were 17%), but check the paperwork or call the lender. Get his name on the mortgage. DO NOT put your name on it unless you want to be saddled with it when he dies.
Depending on the equity stake, he may qualify for a reverse mortgage - a lender makes a monthly payment to the owner and will get repaid upon death of owner, as they will force sale if necessary.
Do look at bankruptcy for him. A secured credit card (your deposit is your credit limit) will start to rebuilt credit. I did bankruptcy in 2013 and now have a FICO of 690 and will be eligible for a new mortgage next month (FHA has a program for bankrupts after 2 years since discharge, which is usually 90 days after filing)…
As a practical matter, a recent bankruptcy is a better bet than one who has never done one - the bankruptcy can’t declare bankruptcy for 10 years - the never-filed can do so at any time.
AIUI, if he plans to live in the house, the law passed in 1982 actually protects his right to assume the mortgage whether the paperwork says so or not.
Anyways, this is a good reason why it’s probably best to consult a lawyer.
We’ve been dealing with my MIL w/ dementia - just got her in assisted living and on palliative care. Couple of thoughts:
-Here in IL there are individuals/agencies that assist in financial/estate planning in these sorts of situations. Everything from advising financial arrangements, looking into care/living options, to moving the individual and selling off excess belongings. We didn’t end up using one, but from our research, rates were far less than you would expect in terms of an atty’s hourly fee.
-Whether you use someone like this, adopt a comprehensive approach, rather than just knocking down each target that pops up. Because…
-Expect this to be an open-ended situation. My MIL got 6 mos to live some 6 years ago. We pissed away considerable time, money, and emotions expecting this NOT to be a long-term situation. You and your spouse need to think long and hard, and be honest with yourselves, in terms of what you feel you owe this individual, and how much you are willing to commit to assisting him attain what standard of living.
Best of luck! At the time I did not appreciate how fortunate I was that, even tho they were only in their mid-70s, my parents both passed quickly in their sleep 1 month apart, and had full control of their faculties when they passed.
Oh yeah - you definitely will need at least a couple grand worth of lawyer. My wife and I are both attys and my BIL is a CPA, and we hired an atty when my Ps died.
I’ll repeat what others have said - here’s another link:
California is a community property state, debts assumed for the community property, unless kept separate (“unentangled”?), are the liability of both. Children or others are IN NO WAY liable for those debts.
If he’s 75 and limited awareness and mobility, then it probably better to move him sooner rather than later into a home. This is especially true if there is an outstanding mortgage on the house he cannot afford, or he cannot afford the taxes.
My third-hand experience - the one spouse was unfit, the other gave away much of the savings to the grandchildren. When they could no longer live in the house, Medicare(?) should have been paying the nursing home fees, but there was a two-year wait because he’d given away some of his savings (i.e. money that could have been used for nursing home care). The rules are designed that you cannot give away your assets just before you ask the government to pay for your old age care.
Selling the (unoccupied) house when one owner was in dementia was not easy in NJ. There’s a whole court process to have her declared unfit, then another to allow a sale, just to be sure it is not a trick to transfer money to the guardian.
So see about moving the FIL out and selling the house to pay off the debts, put a pile in the bank to cover nursing costs. It’s easier that (a) you pay from spouse’s 401K or (b) eventually the house is liened for outstanding debt. If assuming he is capable and can afford to stay living there, you’re going the route (c) FIL repays debt when house is eventually sold (moves out or dies) then have a good lawyer draw it up as a formal contract. Otherwise, selling the house and giving yourself $20,000 may mean for 2 years Medicare will not pay his nursing home costs.
Another option if affordable - you buy the house, charge him rent from whatever income he has, use the money you paid him for the house equity to help pay off debts, etc. Plus, eh should also pay you back for funeral expenses from that. Especially if you can get a much better interest rate than he can.
Nonononono. Do not use your own (or your wife’s own) assets to pay down any debts that were strictly MIL’s. If she’s taken the loan, use it for FIL’s benefit but do NOT directly pay creditors without consulting with a lawyer.
As I understand it, any such debts are owed by the estate. Any assets owned by the deceased must be used to pay down the debts. Your wife is NOT responsible for doing so out of her own pocket. Neither is your father in law if he was not on the accounts.
Presumably the house has positive net value (i.e. value is greater than the mortgage). If so, I don’t know how the law works. Your FIL is almost certainly the default heir, though the laws might vary by state), so the house is his - but if he was not on the title, the creditors MIGHT be able to go after the house’s residual value.
You need to talk to a lawyer. My guess is that the credit card companies may well just write off the debts if they’re not too large, but you need to know what your rights are.
Do your best to persuade FIL to sign a power of attorney so the wife can act on his behalf - sounds like he’ll really, really, REALLY screw things up on his own.
ETA: I see now the reference to California - as a community property state that does change things in several ways (e.g. he might inherit the debt but he also definitely has an interest in the house).
Don’t be cheap. Call a freakin’ lawyer. Don’t rely on Internet advice. Does your wife have power of attorney? If not, she doesn’t have the authority to close any accounts or talk to credit or mortgage companies. I’ll say it again. Call a lawyer.
My mothers’s lawyer fees for her estate, in Idaho, were less than $2k, and that includes selling the house and drawing up some concordence documents, but does not include collecting and distributing assets. The first thing the lawyer had to do was draw up and submit papers to allow me to be one of the executives because although Mom had a will, it was out of date and listed her deceased husband as the executor.
If you MIL’s estate is more than a small amount, and I don’t know what that is in California, then no one is the executor until the court says they are. Yes, you can forward certificates of death, and yes, some accounts won’t care who you are as long as you do that. If you’re going to sell property, though, you’re going to need a court document that creates an estate and names you executor.
It’s possible that your FIL can request a transfer of title and then give you power of attorney to sell the house for him. If you don’t want to talk to a lawyer, talk to a realtor and ask them what you’d need to do the transfer and sale.
It was a CA realtor who told us that we couldn’t transfer title on an unimproved plot in California that Mom owned (as heirs - not as a surviving spouse) without an auxilliary probate in California. We eventually elected to abandon the property, which was worth $2k.
Do not pay any debts until you are certain that they are enforceable.
If you won’t hire a lawyer, maybe NOLO website can help…
Otherwise, you spend an hour or two refining a search on California debt surviving spouse and hope you read the law correctly.
Your local Bar Assn will have a referral service, but realize that it is paid for by the lawyers.
If you want to be your own lawyer, fine. Don’t be surprised if you miss a point or three.
Just FYI: In every state that I know of, with a few exceptions, a power of attorney becomes null and void when the affected parties learn of the death of the grantor.
Generally speaking, the attorney does not have any powers that the grantor does not have. A deceased grantor has no powers.
There may be some state-specific exceptions for donating organs, making funeral arrangements, and cases where the parties were not aware of the death.
I’m assuming it’s the FIL they’d need power of attorney from. He might be able to get the title on the house changed to his name as the surviving spouse without a lawyer, but it might be more than he can handle on his own.
I followed up on this and I just wanted to mention that if you don’t have a power of attorney, you can go to the court and be appointed as your FIL guardian. You’ll need a lawyer.