What happens when a parent dies when...

[isis297]

What is the name of your state (only U.S. law)? NY

My mom is in very poor health and we are trying to make sure all of her affairs are in order "just in case". She used to have insurance on her credit cards that if she died, the accounts would be paid off, but when we contacted them recently, she was told that "she cancelled the insurance" a few years ago which she doesn't remember doing. She is trying to get the insurance put back on or even look into bankruptcy because regardless of any talk about potentially needing hospice, her medical condition requires a lot of doctors, hospitalizations, and medications so it's hard for her to keep up with the payments.

What happens if she dies and still has credit card debt and medical bills left? She is sole owner of the credit cards. My name is on her car and bank account so I don't see how they can touch either of those and she lives with me so she doesn't have a home they can come after. The only other thing she has is a small life insurance policy I figured I would need to take care of her funeral arrangements.

 

[anteater]

If there are insufficient assets in her estate to satisfy the creditor claims, then the creditors are out of luck.

I don't know New York specifically, but, in most states, the creditors could conceivably come after the car and banks account even if co-owned with right of survivorship. But, unless there is real value there, I doubt that they would.

 

[bdancer]

No need to pay for any kind of insurance to pay off the credit card debts and she definitely does no need to file bankruptcy.

All debts will be the responsibility of the estate. Any assets have to be used to pay off the debts before being distribute to heirs. Most states have a priority of what gets paid first -- funeral expenses, final medical bills, etc. Credit card debt is wayyy down the list. If there are not enough assets to pay off the debts, the creditors have to just write it off.

Life insurance policies are not part of the estate and go directly to the named beneficiary. The funds do not have to be used to pay debts.

If your mother's name is joint on the car, her half would likely to considered part of the estate. Likewise, the joint bank account might be considered part of the estate.

 

[commentator]

Those "insurance to pay off the credit card if she dies" deals are a terrible rip off. The credit card company should LOVE for your mom to have one of these policies. Usually they just fleece you for ages, and you forget you've got the policy or they find some trumped up reason to refuse to pay up when the time comes. Are they still taking out so much each month for a premium on this insurance? It's rare for them to stop ripping her off once she's agreed to it. But then, they certainly don't want her to find out that if she dies without any money or assets, the credit cards are pretty much out of luck until the other expenses of the estate are taken care of, as someone else said here.

 

[isis297]

I have to look at her bills to seeif they actually did stop charging her. I know that with every hospital stay they have not paid any of her bills, but I don't know if that's because she didn't do something on her end or because they actually cancelled the insurance.

We just saw one of the doctors and he feels she needs surgery within the next day or two so there isn't anything that we can do now regardless. I've never had to take care of an estate before so I am just trying to educate myself in case something does happen and in car there's something that can be done prior to something happening. We learned the hard way after my grandmother died things that should have been done that weren't.

So with her bank account and car, is it safe to assume that the creditors would look at half of the value of both? She does have a couple of storage units from her house as well from when I moved her in with me so I could take care of her. Would the items from those have to be part of an estate processing knowing that it's just your basic household things like dishes and tools and some furniture? And would that matter if my name was on there as well or not? What if my name was the only name on them even though they are paid via her bank card?

Thank you for your help. She was worried the other day about this and I told her I would try to find out any answers we needed and take care of things.