Paying off dept from estate ?

[pjm333]

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

My mom is nearing death and my sister and I are considering her estate. In her will, my mom has given her condo to my sister and has made me her beneficiary to her life insurance policies. My question is if her estate is in debt for example $10,000 for medical bills, how does this bill get paid. Will this amount be deducted from value of the condo and the life insurance? I understand that the life insurance would be liquid asset so 1/2 of this amount would be easy to retrieve but how do you get 1/2 of this bill from the condo without selling it.? Does my sister need to take a mortagage out? I am not sure how fast the condo would sell.

My lawyer said that medicaid/hospitals would come after the estate. I want to know how these bills would be paid for the division of assets.

 

[curb1]

It kind of depends on how cooperative you are with sister. This could be an easy settlement if you and sister are civil with each other. It is just balancing the numbers after everything is paid. You could pay the bills out of the life insurance proceeds and then balance everything when the condo sells. I realize that siblings aren't always civil so this might not be available for you. What did the attorney suggest when you asked him/her?

 

[pjm333]

Thanks for your reply, the attorney basically said that the estate is responsible so thats why I am asking. Me and my sister are civil now but I am not sure what will happen when the estate pays its dept. The condo is paid for so will she have to take out a mortgage, who decides how the debt is paid from the estate ? Does her debt come out of life insurance because it is liquid asset first ? Thanks again

 

[curb1]

That is why I asked how you get along. The pot of money from mother can pay the debt easily if you and sister just pay the debt from the life insurance proceeds and then settle up when the condo sells. I sense that there is some friction and mistrust between the two of you. There is no need to make this complicated if you two get along.

 

[nextwife]

If you are the named beneficiary, technically, the life insurance is NOT an asset of the estate. The condo, however WOULD be an estate asset, and creditors can go after recovery from the condo. If sis wishes to KEEP the condo, she'd need to get a mortgage and pay off estate creditors.

Of course, you and she can create a written, legal agreement to sell the condo and then pool life insurance and condo sale proceeds together, pay creditors, and split what remains.

 

[pjm333]

My sister says she is keeping the condo which is worth around $180,000 but has no money besides the condo value. My sister & mother are both on the condo deed and the lawyer first said that her 1/2 was safe but also said if the medicaid/medical debt is large enough, nothing is safe (Life Ins & Condo)
The "settling up" part is my concern and the mention of getting a second mortgage is not sitting well with my sister.The inheritance is shrinking and can feel the friction building. Thanks again for your help !

 

[curb1]

How much is the life insurance? Any other assets?

 

[justalayman]

can you clear up a few things?


are you a named beneficiary on the life insurance policy(ies)? If so, nobody can reach the life insurance benefits. They are yours and actually the will has no control over them.

If your mother, or her estate is the beneficiary, then the money can be controlled by the will but it will be subject to payment of the assets of the estate before you receive anything.

then, how is the condo titled? If tenants in common, your sister already owns 1/2 of the condo which is not subject to claims against the estate. The other half (your mothers share) would be subject to claims against the estate.
If the title is joint tenants with rights of survivorship, the will does not control how the condo is dealt with. It automatically becomes your sisters.

depending on the answers to those questions, what can happen is affected greatly.

 

[pjm333]

justalayman,
I am beneficiary of the life insurance policies and the way the lawyer explained it to me is that medicaid laws change often and usually always in favor of medicaid. The condo is titled tenants in common so thats good news for my sister. Thanks for your help !

 

[anteater]

If you are the designated beneficiary of the policies (not via a provision in a will but with the life insurance company), then the proceeds are your's.

Maybe I was not paying attention, but how does Medicaid enter into this?

 

[curb1]

pjm333,

How much is the life insurance? Why would there be a bill from Medicaid?

Your problems are:

1) Sister wants the condo, but can't afford it.

2) You don't want to pay for the medical bill out of the insurance money.

3) It seems as though there is a problem between you and sister to split the assets down the middle. Did mother actually want one of you to get more than the other, or did she just not know how to make the split?

This should be very simple if you and sister could communicate.

 

[pjm333]

Sorry for the confusion but its all new, basically we have to figure out how the estate will pay off the dept before the assets are distributed. Thanks for everyones help !

 

[justalayman]

Sorry for the confusion but its all new, basically we have to figure out how the estate will pay off the dept before the assets are distributed. Thanks for everyones help !

well, good news for you; bad news for sister. Your money is not part of the estate so it is not available (unless you give it to the estate) to pay bills. The condo, or the equity anyway, is available to pay bills. So, if it comes down to it, the condo would have to be sold to pay estate bills if there are no other assets available to pay the bills with.

 

[pjm333]

Thanks again justalayman !