OK, let’s say Jack lived it up until the day he died. In this context, of course, living it up means he acquired a massive debt load, including luxury consumer goods (cars, HDTVs, boats, etc.) he had no real way to pay for. After he keels, the Creditor Conga Line forms on the left and I understand there is a very well-defined order to who gets first, second, third, and thirtieth whack at the assets.
Can the people he bought the goods from jump in line by sending repo men to grab what he neglected to pay for in life? I’m assuming Hank’s Boat and RV is a bit lower on the list, and that the goods would be sold to pay off the debts to creditors higher up.
Depends on how he paid for the items. Items financed with the purchased item held as a lein against the loan could be repossessed almost immediately. Some states would make them wait till the estate goes into probate, some like mine don’t. This would likely include things like cars, boats, RV’s. In most cases of probate, these folks get to be at the head of the line and are called secured creditors. Next would be the unsecured creditors to split up anything thats left. I know of someone that did something like this when he was diagnosed with a fatal disease, he lived it up for a few months till he got too sick. Within a few days of being notified of his death, most of the secured creditors reclaimed their property. The sad part was when his daughter thought she had everything taken care of, a couple of the secured creditors sued the estate for loan deficiencies, the items repossessed sold for less than was owed. It wiped out what little money she had left after paying everyone else.
This is not “sad.” It’s business. He agreed, by signing the contract to purchase said items, that if he did not pay for them, the creditor could repossess and that he would still be liable for any amount due that was not recovered by the sale of the asset. His estate would be liable for any deficiency in the event he died. The creditors did not wipe out what she had; the man’s debts wiped out what the estate had left. She didn’t have anything at all yet. Heirs/beneficiaries of wills only inherit if there is something left of the estate after all debts are paid. If he had wanted his daughter to inherit anything, he should not have indebted himself to that extent or he should have had life insurance naming her as beneficiary, which the creditors could not have touched.
In the U.S., the upside to this situation (for the heirs) is that creditors cannot go after the heirs for unpaid debts. If the estate cannot satisfy all of the debts, the creditors are out of luck.
I have heard that this is not the case in some other countries (Germany?), and that potential heirs have to decide whether to accept an inheritance or not. Accepting an inheritance apparently makes an heir liable for the estate’s debts.
It seems seriously wrong that a child could be on the hook for the debt of a parent. She did not make the agreement to pay her father’s bills and may not have derived any benefit from his purchases. Hell, they could have been estranged for decades.
Ed McBain’s last 87 Precient mystery “Fidlers” had just such a plot. The guy with was going around living it up with everything on credit because he had terminal liver cancer.
IRL, your estate would be responsible for the debts after inheritance taxes were taken out first. But WTF would you care? You are DEAD!
Where does anybody in this thread say that an heir is on the hook for the deceased person’s debts?
The creditors go after the estate of the deceased, not the heirs personally. However, if the estate is depleted before the heirs get it, that’s just too bad.
Here (France) you typically accept an inheritance with reservation (“sous réserve d’inventaire”) meaning that you provisionally accept it, but reserve the right to eventually refuse it if it turns out that the debts exceed the assets.
I believe that you can accept it without reservations. But it hardly makes any sense to do so, except if you really want to repay the debts of your deceased relative (in which case, tax-wise it might make more sense than refusing and paying the difference) or maybe (just an hypothesis) if you really want to keep a particular asset like, say, the family house, rather than it being auctioned away.
No, what’s “sad” is that this person thought they could “screw over” his creditors with his death when in reality he just screwed over his daughter. Well not exactly screwed over, but he probably assumed that there would be something left of his estate that would transfer to her, but by taking on all of these secured debts in the last stages of his life he essentially wiped out the actual equity in his estate due to the difference in the market value of distressed “toys” and the remaining loan amounts. Probably neither anticipated this and everyone (debtors included) likely would have been happier if he hadn’t engaged in such foolish borrowing right before his death.
In Anglo countries the “estate” pays the debts and then distributes what’s left to the heirs. In Spain, very much like in France, there is no “estate” as such and the heirs are awarded together assets and liabilities from the deceased. The heirs, obviously, can accept or reject the inheritance or accept it subject to the condition that the liabilities do not exceed the assets. In my view it is a mess and I prefer the anglo system.
Of course it’s sad, for the daughter, and I’m assuming that she was the intended recipient of the OP’s sympathy. The fact that this was simply business and the guy running up the debts was an inconsiderate jerk doesn’t for a moment lessen the sadness of the situation from the daughter’s perspective.
There was a similar case in Spain. I do not remember the details but it was something like a man killed his wife and other people and then committed suicide. The daughter was making the rounds of the talk shows, all tearful, saying she was about to lose her home, the home where she was born, the home where she grew up and all due to some perceived unjustice of the law.
The truth which no reporter wanted to say because it might spoil the sobbing story is that it was never her property. It was her father’s property and now it would go to repay and compensate his victims. Which I think is totally fair.
The credit union I belong to offers it’s members free life insurance for all loans up to 20,000.00. So if the party dies the loan is paid off by insurance and the estate is free from that debt obligation. Banks and finance companies will often offer similar insurance for a fee.
Well, I guess that’s the part I don’t get. I agree it’s sad the daughter lost her father, but none of the money/assets were hers in the first place. I do not think it’s sad that she inherited nothing. He did what he wanted to with his own money. Parents don’t owe their children anything post-mortem.
What family home? The situation was that the man ran up massive debts in the months prior to his known-impending death, which “wiped out what little money she had left after paying everyone else.” I pointed out that the money was not hers until all the debts of the estate were paid. No family home was mentioned. I understood the daughter to be an adult. Perhaps she wasn’t, but I did not get that impression.
If the father had a dependent child to provide for after death, he would have been stupid, selfish or exceedingly negligent to have run up said debts and/or not have life insurance, and yes, that would have been sad for the child, but that doesn’t seem to be the case here. Still not sad.
Hell, oftentimes, the creditors all get screwed. I was involved in an estate where the dead guy had 120k in potential debt and after the house was sold and the mortgage paid, there was 120k as well. Since the executor had to root through all of the bills, he had a debts and demands hearing and sent notice to the creditors where they had to present evidence of their debts. None of the creditors showed, and the debts were expunged. Later on, some tried to collect but by that point, they were SOL.
I should mention that all of this is generally contingent on the state law where the decedent last resided and naturally state law will vary from state to state.