Dealing with Creditors after the passing of a spouse or loved one
Dealing with creditors after the death of a loved one is always a confusing and stressful thing. Most people feel compelled to pay the creditors, feeling that it is the “right thing to do”. In my practice, I always advise my clients that they should not contact creditors immediately after a person passes away, especially if the obligation is tied to an asset that a living family member is using such as a home or car. Although I advise not to contact the creditor regarding the passing of the debtor, I usually advise my clients to keep the loan/payments current if the family intends to keep the financed asset.
How creditor claims are handled in a probate
If there is a probate needed on the deceased person’s estate and the deceased person has been gone for less than two years, then we must publish a notice to creditors within the estate proceedings. This notice to creditors is a general notice in the local newspaper and will run for two consecutive weeks and notify any unknown creditors of the decedent that there is a probate opened and now they can file a claim or demand for payment from the estate. This process is handled through the Court where the probate is filed. Specific notice must be sent to the decedent's known creditors. Once a creditor files a claim against the probate, the claim is evaluated, and a determination is made as to whether that claim is valid. Many times, claims filed against estates are filed by third parties on behalf of the original creditor. This leads into an area that is objectionable by the estate because the third-party claimant may not have provided proof of the ownership of the debt that they are attempting to collect from the estate. There are times that the claim is considered invalid because it is contingent on a medical insurance policy paying out for the medical bill and the medical facility has prematurely filed a claim for a contingent claim.
Long story short, I advise my clients to first closely evaluate the types of assets and debts that the decedent has prior to contacting any creditors. When it comes to auto loans and homes, banks can be finicky about how they treat loan repayments if the sole debtor is deceased. Sometimes contacting the creditor prematurely is a mistake and can cause the surviving family member(s) grief from aggressive debt collections. There may even be instances when the surviving family member has no obligation to pay the debt of the decedent. This often occurs when the debt is in the decedent’s sole name, such as a credit card or medical bills. When properly handled, creditor payment and negotiations can be a simple and straight forward process.
The contents of this page is intended for general informational purposes only and is not intended for specific application to any particular set of facts and circumstances. This page is not a substitute for legal counsel on any particular matter, nor should it be construed as legal advice on any subject matter.
Meeting with your Estate Planning Attorney and what you should know
Over the years I have met with thousands of Clients to review their estate planning needs. Many people know they need to make estate plans but often delay scheduling an estate planning consultation for months, years, or even until it’s too late.
Most people are not aware of how relatively easy it is in Florida to avoid most probate situations with some basic estate planning. The first step is to meet with your estate planning attorney to create or perhaps update an older estate plan. To prepare for that meeting here are a few basic things that you can do ahead of time.
1. Assets: Have a very good working knowledge of all of your assets, bank accounts, investments, real estate, etc. Also, you should review how each financial account is titled(single or joint) and is there any “pay on death” beneficiaries designated on the accounts, if so, who?.
2. Who do you want to be in charge: Know which persons that are closest to you and who you would want to perform certain duties upon either your mental/physical incapacity or passing. Who would you want to deal with your doctors and managing your finances if you become incapacitated, or who would you want to administer your estate if you passed away?
Ideally, you should have a first choice and a second alternative choice for “power of attorney” and “personal representative”.
3. Who gets what: How much do I leave to my children and/or grandchildren? This is a question only you can answer. Keeping in mind that other than your spouse, you are not obligated to leave any family member anything and are free to leave your estate to whoever you want in any share that you want.
It is also very important to leave written instructions regarding any family heirlooms, such as jewelry or furniture that you wish to go to specific persons.
Estate Planning in a Second Marriage
Life happens. A second marriage is often met with its share of trials and tribulations especially when there are children from previous relationships. There is often a desire to adequately provide for your current spouse in the event of your demise but also try to assure that assets ultimately go to your children or other beneficiaries. My first evaluation is always about family dynamics and what are the ultimate goals of the client. These goals can affect the titling of assets, beneficiary designations, the need for a Living Trust, choice of power of attorney, personal representative, etc..
Once primary goals are established, it is necessary to take a good look at exactly what assets exactly there are involved, who’s they are, how they are currently titled, are there POD(pay on death) beneficiary designations on all accounts?, etc..
A review of assets can be tricky. Often one spouse has brought more to the table financially than the other, often from a prior relationship or from personal funds. This person naturally quite often wants those assets to pass to their family upon their passing or they may wish to give their spouse some lifetime interest in the asset with the remainder passing to their family.
Example: Bob and Mary get married, it is a second marriage for both, both Bob and Mary have two children each making four children in total. Bob has a home that is paid for and a good pension and some certificates of deposit. Mary has social security income and a small savings account. Mary moves into Bob's home and they share family resources to maintain everyday life. Bob has expressed a desire to Mary that he would like to have Mary stay in the home the rest of her life if something should happen to Bob but that the home would ultimately go to Bob’s two children upon Mary’s passing (as the home was purchased during his previous marriage and was the childhood home of his now grown children). This is very common and is called a “Life Estate Interest”, Mary would not own the home but would have a life estate interest meaning that she could live there for the remainder of her life but would not have the ability to sell the home. As to bank accounts, Bob has expressed a desire that all bank accounts go to Mary if she outlives him, but Mary would like her small savings account to go to her two children immediately upon her passing, regardless of whether Bob has passed, as Bob’s financial standing is good and he would not need the extra monies. This is often easily accomplished through the proper titling of assets and the proper designation of POD beneficiaries on financial accounts!
The above examples are common scenarios but there are countless other scenarios. This is why a consultation with a licensed Florida attorney to review the particulars of your family’s estate planning needs, is especially important where there are second marriages and children involved.