What prevents old/dying people from taking out a bunch of loans and giving the money away before they die?

I recently saw one of those “What Should I Do?” advice columns where somebody’s grandparent with dementia was getting taken advantage of by another relative to have her take loans from those scummy “Get $1,000 with only your signature as collateral” online loan places and then giving the money to her. For some reason the advice to the person was to force the relative to pay the grandparent back to repay the loans, however the grandparent had no substantial property anymore (having given it all away before she got dementia) and was living in an assisted living facility.

Now from what I understand, if somebody dies with a bunch of outstanding loans and the bank or whoever can’t repossesses the property of that person to make up for that debt, that debt basically goes away. So why would the advice be to repay the loans and not just let the loans go away on their own once the grandparent dies? I know criminal fraud could be charged but seems highly unlikely to be proven.

Because it’s the proper thing to do. I can’t imagine any reputable advice columnist giving unethical advice.

If it was you the money was owed to would you want it paid back or would you want the person to not pay it back and then croak, leaving you SOL?

The bank may be unwilling to give them loans if they can’t prop up a convincing amount of collateral for it. And if the elderly person does have sufficient collateral (such as a house,) then they might not have to borrow like this in the first place (although they do need the house to live in, so maybe this would be the equivalent of selling their house indirectly to the bank.) The bank may also ask why the old feller wants to borrow this money, for what purpose.

Also, if I’m not mistaken, in some fraudulent activities, you’re not allowed to keep money that a friend or family member gives to you if they did so with intent of criminal fraud, and you would have to give it back to the “victim” (in this case, the bank.) So even if your dying grandfather borrows $500k with intent to die and leave the debt unpaid and gives you a chunk of it, saying “teeheee,” you might be required to hand it back to the bank.

Except the OP is talking about one of those signature loan places where you need little to no collateral and I doubt you could get 500K from no matter how many you hit.

If the loans got converted to cash how would they know what happened to it?

This thread reminds me of a story my younger brother tells.
Circa 1980 a kid he went to school with went around and borrowed as much money as he could from anyone that would lend it to him. He had some story that the coming weekend it was his birthday or he was getting confirmed or something or other and was expecting a great windfall so he could pay it back. He reaped about $800 which was a good chunk of change for a 13 year old at that time. He also borrowed stereo boom boxes, bicycles, record albums. All sorts of shit.

I don’t have to tell you what happened, right? Right?

Little fucker neglected to tell anyone that his family was moving 1500 miles away out of state that weekend. Which might as well have been to the moon as far as the kids he ripped off were concerned.

My brother insists he didn’t give him anything. But he tells the story with hint of rage in his eyes and voice. So I’m thinking otherwise.

Wonder if anyone used the internet to find out whatever happened to that guy.

Yeah I’m specifically referring to those places that only give you a couple thousand at most but also have the least stringent checks which is how an old woman is able to get loans without any collateral.

A few years ago we were vacationing in the Caribbean and we met a guy who was celebrating something. He bought several rounds of drinks for everyone at the restaurant and when I tried to buy him a drink, he refused.

We started talking and he told me he’d gotten results on a biopsy he’d had done in the US, days before leaving on vacation. No details but he said he would be dying soon.

He was maxing out a bunch of credit cards. He had no “estate” and nobody to leave it to, anyway. Hearing his story kind of ruined the party for me, so we left a short time later. No clue what happened after that.

Yeah, I was wondering about credit card debt. Does that go away, too, or can the CC companies make a claim on the estate?

Never mind, I just looked it up and CC debt is paid off by the estate before any other distributions of assets are made to heirs.

Yeah, the guy I met had no actual estate, he owed more than his assets. He was in his forties, with no heirs, no family.

But often people have no estate, and credit card companies are famous for pressuring survivors to pay debt they have no legal obligation to pay. Credit card companies have actuaries. They know the risk of people dying, but they still do this.

It’s the same risk a lender takes with any unsecured loan. People default on loans all the time without dying and the loss is just baked into the system. You don’t have to be dead to be a “deadbeat”.

Jerry Lewis covered this angle in the movie Hook, Line and Sinker decades ago. Doctor tells him he’s going to die in a few months, but in those days (early 60’s) credit cards took a while to get reconciled from paper receipts, especially overseas, so “take your credit cards, go to Europe, and have a good time.”

Spoiler: Of course, he wasn’t dying. The doctor was boinking his wife… Then tells him he has to fake his death and disappear to Israel. Much hilarity ensues.

Naturally, taking out loans under false pretenses, including no intention to pay back, would be fraud. Not sure what the recovery processes would be, but keep in mind for example perfectly innocent investors in Madoff’s scheme who did withdraw profits were forced to pay them back. A crook cannot insulate illegal earnings by passing them to someone else. (Unless it’s a legitimate business transaction - they’re not going after the restaurant for the money he paid for a meal…)

Plus, transactions in anticipation of bankruptcy can be reversed by the bankruptcy judge. Not sure if there would be an explicit bankruptcy for the estate?

Yes, there are two scenarios - if you have any tangible assets, your estate is dinged for whatever balance they can recover. If you have no estate to recover from, well, sucks to have lent money without doing due diligence. All debts to the estate must be settled before any distributions to beneficiaries. And if the money was for example to buy a car, the car likely has a chattel mortgage against it - the lender can repossess if the loan isn’t repaid.

Also, if there is any evidence that the person was really in dementia at the time, then any evidence they were put up to this could result in fraud charges against the person putting them up to this. Plus, whoever would be managing the finances of a person with dementia is not allowed to simply help themselves to the assets.

Another interesting wrinkle - my dad gave a decent sum, over ten thousand, to his nieces before he went into a home. There was a rule (USA? NJ?) that if you give away more than $X in the 18 months before going into assisted living, Social Security(?) will not cover the cost of your stay until the 18 months are up - specifically to avoid an elderly person distributing their assets and sticking Uncle Sam with the bill, or the heirs exploiting the elder person.

Correct. There is a whole body of rules to prevent people from pauperizing themselves via gifts and transfers shortly before incurring large Medicaid funded, means tested expenses.

And there’s a whole practice of law that works around these rules!

This. A creditor can file a claim against the borrower’s estate, and hope to be repaid. But an unsecured loan means you’re last in line for payback. Mortgage and auto lenders’ loans are collateralized: they can put a lien on the house or car for which they provided a loan. But credit card companies and lenders like the ones described by the OP (“get $1,000 with only your signature as collateral”) just have to hope there’s enough money in the estate for them to recover their money. If there isn’t, they’re screwed. This is why mortgages and auto loans typically come with modest interest rates (assuming you have good credit history), and unsecured loans (credit cards and such) come with very high interest rates (even if you do have good credit history).

AIUI, part of settling an estate is to publicly announce the person’s death (usually with an obituary in the newspaper), which constitutes sufficient notice for lenders to file claim against the estate. After a sufficient waiting period, the decedent’s will is executed, or if there’s no will, the probate court settles the estate. If lenders have made their claim, they may get paid from the estate (assuming the estate can produce sufficient funds). Mortgage and auto lenders can either repossess the collateral, or expect the executor to pay off the outstanding amounts of those loans. But if there’s not enough money in the estate to pay outstanding unsecured loans, then the lenders of those outstanding loans have no legal claim against the survivors.

Sure, but they still call and give people hell and make them feel guilty.

Presumably because the grandparent wasn’t about to die and having debt can cause trouble even if you have dementia and live in an assisted living facility.

My understanding is that this is incorrect.

My guess is that those places run a quick electronic check on the applicant. So it’s not that they’re not stringent, just that the loan amount is low and they have a rapid process.

If I understand the OP correctly, grandma had dementia but she wasn’t dead. So the minute she misses her first payment, the collection agency vultures come after her. Of course, if grandma has enough wits left to tell the bill collector she gave all the money to a relative, that’s going to be hanging out there when the bill collectors try to collect their debt from grandma’s pitiful estate.

And if grandma happens to be living in a senior facility on Medicaid, and Medicaid finds out she had assets that she was giving away, that’s another can of worms.

I mean, it sounds like a great idea in theory, but it’s hard to control once it gets started.