Debt responsibilities for siblings for a single person

[NBrazil]

What is the name of your state (only U.S. law)? Me? Georgia. The Deceased - Wisconsin and dual citizenship (American/Australian)

One out of 4 brothers passed away, declaring his girlfriend and another brother executors. He was unemployed at the time and had no insurance (51 years old), and was under ICU care for about a week before passing.

Will left some small amount of property to girlfriend (some of which is in Australia), he had a life insurance policy with her as beneficiary.

He owned three properties (mortgages), two are rented, one is a condo with a draconian board that is milking the building until it bleeds. Anyway... the will pretty much says each brother gets 1/3 of the estate.

However, it doesn't look good, what with three mortgages, we assume a huge hospital bill, a personal loan in the amount of $35,000 from another family member and high credit card debt. The Australia angle adds a twist, for sure.

Basically, the will is in the process of probate (girlfriend has retained a lawyer in Wisconsin, brother has a lawyer too).

Even though 2 out of three properties are performing (one the rental couple wants to buy), it is obvious that the debits outweigh the assets, even if everything could be sold at market value (that is before the markets collapsed).

So, we expect nothing from this as "inheritors" - but I am concerned about the bills/debt angle. He was single, we are siblings, but also named to inherit 1/3 each. Does this mean we inherit his debts? (It would be impossible for any of us to have the means to pay them - for instance one brother is unemployed and I am barely scraping by.)

Of course an inventory of all of his possessions are being listed (although the stuff in Wisconsin and Australia will have to wait a few months - weather and difficulty traveling so far), but it really looks unlikely that there will be barely more than a fraction of what is needed to satisfy his creditors.

Yeah, so I'm repeating - are we inheriting his debts? We figure his girlfriend is getting the best part of the "deal," no relations and a life insurance pay out. But that is neither her nor there. Any idea of our liabilities?

(Small joke coming - time to consider bankruptcy? Only if we are liable, of course. I don't want to think what the hospital bill is!)

Sorry this was so long, I could only hit the high (bulleted) points of this.

 

[anteater]

Any idea of our liabilities?

There is no "our." Your brother's estate has liabilities. The co-executors simply need to consult with the attorney(s) to determine which creditors have priority (if any of them do) and the proper order of paying the creditors.

(Co-executors isn't the greatest idea. Each having a separate attorney is even less great.)

 

[NBrazil]

There is no "our." Your brother's estate has liabilities. The co-executors simply need to consult with the attorney(s) to determine which creditors have priority (if any of them do) and the proper order of paying the creditors.

(Co-executors isn't the greatest idea. Each having a separate attorney is even less great.)

Oh yeah, totally agree about the co-executor/attorney thing. Brother was trying to treat her as a faux-wife hoping family involvement would bring her closer. But none of us knew she existed, loverly.

So my analysis now is nobody in the family gets anything (not even our mother who lent he that large sum of money) except the creditors* and attorneys... and the creditors in a specific order determined in probate. That property will be forced to be sold, and that we siblings won't be drawn into debt, but then neither will there be anything left. I guess that would be the best possible outcome (except that someone needs to go to Australia to take possession of the few valuable things he has in storage to sell - sigh, not cheap).

*Yes, I figure mom is one of the creditors - and we would LIKE to see her paid before anyone.

But so long as the three of us aren't responsible for debt, I guess that's okay with me. That was one of my main concerns, does being named an inheritor mean you inherit debt? Only the estate, eh? Interesting. (So if an estate for a single person is insolvent, it is just too bad, so sad for the creditors, eh?)

 

[anteater]

As long as nobody does anything dumb like taking personal responsibility for a debt, yeah.

State laws vary slightly in the order of distribution, but it is usually something like:

Expenses of the estate, including executor and attorney fees
Funeral expenses
Expenses of the last illness
Taxes
Creditors
Beneficiaries

If Mom can offer evidence that she made a loan (rather than gifting money) to brother, then she should make a claim on the estate. She can't be paid before other creditors and the executors need to be careful in handling that claim if there are other creditors. No favoritism and no lowering the standard of proving that the claim is legitimate.

 

[NBrazil]

As long as nobody does anything dumb like taking personal responsibility for a debt, yeah.

What constitutes "dumb?" Meaning, the executor is the only sibling that actually has money (a business owner), and is considering paying off the mortgage ($12,000) on the non-performing property and either renting it or trying to sell it (in a VERY depressed market - maybe, MAYBE can get $40,000) to generate cash or cash flow.

If Mom can offer evidence that she made a loan (rather than gifting money) to brother, then she should make a claim on the estate. She can't be paid before other creditors and the executors need to be careful in handling that claim if there are other creditors. No favoritism and no lowering the standard of proving that the claim is legitimate.

As for our mother, definitely a loan, but a quick and informal (dumb) one - no paperwork, only a cancelled check (also dumb) - she trusted him to pay her back (as he had in the past). Ah, but it would seem that the agreement we brothers have that she comes before us is actually automatic. We being mere beneficiaries and she being a creditor. No favoritism will be shown.

But two attorneys, two unrelated executors, two countries - he sure made a mess of it. So long as they can't come after me and my siblings involuntarily that'll be okay. Ha, as much as I feel this is a mess, I've been reminded by an a friend that there are MUCH worse situations - blended families with no will and high debt, so I guess I should count my blessings (especially because I'm not the executor!).

Expenses of the estate, including executor and attorney fees
Funeral expenses
Expenses of the last illness
Taxes
Creditors
Beneficiaries

Hm, I wonder how far down this list the estate will "make it?" Well, funeral expenses have already been paid (cremation). I guess I can just sit back and see how it plays out - I understand that my brother (executor) and the co-executor have about a year tops to do it all. But in this economy, what if nothing sells???? I guess that means not everyone gets paid. Tough breaks here.

Thanks for the interesting insights.

 

[anteater]

What constitutes "dumb?" Meaning, the executor is the only sibling that actually has money (a business owner), and is considering paying off the mortgage ($12,000) on the non-performing property and either renting it or trying to sell it (in a VERY depressed market - maybe, MAYBE can get $40,000) to generate cash or cash flow.

It is unclear whether you mean: 1) that the brother is considering purchasing the property from the estate himself or 2) pay off the mortgage himself and rent/sell on behalf of the estate.

If #1, he could certainly do so. But his position as an executor, essentially being both seller and buyer, makes this a potentially sticky option. It would have to be an arms length, "clean as the driven snow" deal if he is to avoid allegations of self-dealing.

If #2, I would question what the point is. If the liability situation is as you describe it, then it seems to me that it is a lot of work that may only benefit the creditors. Why not just sell it?

In any event, these are the kind of situations that need to be discussed in detail with the attorney(s) retained by the executors.

 

[NBrazil]

It is unclear whether you mean: 1) that the brother is considering purchasing the property from the estate himself or 2) pay off the mortgage himself and rent/sell on behalf of the estate.

If #1, he could certainly do so. But his position as an executor, essentially being both seller and buyer, makes this a potentially sticky option. It would have to be an arms length, "clean as the driven snow" deal if he is to avoid allegations of self-dealing.

If #2, I would question what the point is. If the liability situation is as you describe it, then it seems to me that it is a lot of work that may only benefit the creditors. Why not just sell it?

In any event, these are the kind of situations that need to be discussed in detail with the attorney(s) retained by the executors

Probably neither and both. It would be bought for the sake of the estate to see if it can either (a) become performing and therefore eventually be of benefit to the benficiaries in the future while now satisfying payments to creditors or (b) to keep it from forclosure (there are massive assessment/condo fees each month)... as it is not really all that "desirable" (the market in Florida is terrible, and this is not prime property - so selling it would be extremely difficult in an environment where even prime beach front property has sold as low as $25,000) and could take some significant time to sell.

So, under normal circumstances, simply selling would be good, but these are not normal economic conditions right now. So the idea is to hold onto it and rent until things get better, otherwise it is just a money pit (fees).

Anyway, I'm not privy to all that is going on (thank goodness), this is just what I gather from my other brother who is only partially in the loop. The executor is working towards handling everything cleanly and with minimum harm to all involved. Would that it be easier - but that's where the attorney comes into play (wondering what happens if their fee exceeds the estate's value?).

Thanks for your feedback anteater. I'm totally flumoxed by all of this... I don't understand probate - doesn't a judge ultimately decide how to handle things? Like what MUST be sold (if possible), and what each creditor has a right too? And what happens with insufficiency of assets and so on?

Side note: there is some potentially valuable furniture in Australia - but again, economic times may turn $30,000 worth of furniture to $3,000, if that. Antique dealers are cut-throat.

 

[ladybg1]

You just mentioned that this property is in Fla. I can tell you that a formal probate will need to be opened in Fla due to the real estate.Your brother should start looking for a Fla atty to handle it.

 

[NBrazil]

You just mentioned that this property is in Fla. I can tell you that a formal probate will need to be opened in Fla due to the real estate.Your brother should start looking for a Fla atty to handle it.

For a second there I got nervous thinking of yet another attorney, then I had a "doh" moment, the brother co-executor LIVES in Florida, therefore.... I can only assume that is what he has already done. Whew.

But another property is in Wisconsin, so I wonder if yet another attorney will be needed (on top of the one the girlfriend - in Wisconsin - has, as this property was willed to the brothers). Leave us not forget Australia - but I'm not going into that now.

Makes me wonder if there will be enough to pay the attorneys even, and, if not, then what? I don't think it would be right for a court to force someone into bankruptcy from probate - aren't the funds supposed to come from the estate, not the executors? My head is spinning from this.

 

[NBrazil]

State laws vary slightly in the order of distribution, but it is usually something like:

Expenses of the estate, including executor and attorney fees
Funeral expenses
Expenses of the last illness
Taxes
Creditors
Beneficiaries

Quick question one of my other brothers has - sure, creditors have a right to be paid, and I agree, but he is of the opinion that credit cards (i.e. UNSECURED credit) write it off, after all, it is unsecured. I am of the opinion that (especially in these times), they won't and may sue the estate. But what do I know, eh?

Typically, what can one expect from unsecured creditors?

 

[anteater]

If your brother were still alive and he decided to quit paying the credit card companies, would they say, "Oh gee, we're unsecured. We'll just have to write it off and forget about it." ????

If anything, pursuing payment from the deceased's estate is easier than pursuing payment from the living. It costs very little to file a claim with the executor. Maybe they will; maybe they won't.

Tell the girlfriend and your brother the executor that they should not try to get cute. They could end up personally liable. They have a duty to all the interested parties, and that includes creditors.

If you really want to get into this, the WI statutes are here. The ones dealing with probate begin at Chapter 851:
Wisconsin Statutes and Annotations - Legislative Reference Bureau

In particular, 859.25 addresses the priority of payment.

 

[NBrazil]

Thanks. And I'm sorry I wasn't clear, the question wasn't from either of the executors but from the other brother. Neither of the former have any intention of "getting cute." The question stems from receiving a note from at least one of the CC companies with condolences, a referral to a counselor and a closing of the account... so there was some naivete in regards to other accounts.

The sad thing is the that it is important to be absolutely fair, no preferences, when our mother is one of the creditors. Paying back her informal loan (if possible) is high priority, but we know it cannot be treated any differently from any of the other unsecured creditors - i.e. no favoritism. Doing the right legal thing is job one.

Thanks for the reference. But at least on of the CC companies seems to have just closed the books.

 

[anteater]

Thanks. And I'm sorry I wasn't clear, the question wasn't from either of the executors but from the other brother.

I did misinterpret at first, but then caught it. I was suggesting that the co-executors should be listening to the attorney(s) that they have retained, not one of your siblings.

That the CC company has closed the account does not necessarily mean that they will not file a claim. Most have separate departments that deal with probate and estates and it may take a bit for the info to make its way over to that department. And, as I mentioned, filing a claim does not cost much.

I understand your feelings about your mother's loan and I do not know WI statutes in depth. But, just from a personal viewpoint and not necessarily a strict legal one, I believe that estate administrators have a moral obligation to deal with known legitimate creditors even if the creditors do not file a claim.