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Intestate

What If Grandma Didn’t Have a Will and Died from COVID-19?

What If Grandma Didn’t Have a Will and Died from COVID-19?

What if Grandma didin’t have a will and died from COVID-19? The latest report shows about 1.87 million reported cases and at least 108,000 COVID-19-related deaths were reported in the U.S., according to data released by Johns Hopkins University and Medicine.

Here’s a question that is being asked a lot these days: What happens if someone dies “intestate,” or without having established a will or estate plans?

If you die without a will in California and many other states, your assets will go to your closest relatives under state “intestate succession” statutes.

Yahoo Finance’s recent article entitled “My loved one died without a will – now what?” explains that there are laws in each state that will dictate what happens, if you die without a will.

In Pennsylvania, the laws list the order of who receives upon your death, if you die without a will: your spouse, your children, and then your parents (if still alive), your siblings, and then on down the line to cousins, aunts and uncles, and the like. Typically, first on every state’s list is the spouse and the children.

You may also have some valuable assets that will not pass via your will and aren’t affected by your state’s intestate succession laws. Here are some of the common ones:

  • Any property that you’ve transferred to a living trust
  • Your life insurance proceeds
  • Funds in an IRA, 401(k), or other retirement accounts
  • Any securities held in a transfer-on-death account
  • A payable-on-death bank account
  • Your vehicles held by transfer-on-death registration; or
  • Property you own with someone else in joint tenancy or as community property with the right of survivorship.

These types of assets will pass to the surviving co-owner or to the beneficiary you named, whether or not you have a will.

It’s quite unusual for the government to claim a deceased person’s estate. While it might be allowed in some states, it’s considered a last resort. Typically, we all have some relatives.

If you have a loved one who has died without a will, speak with an experienced estate planning attorney about your next steps.

Reference: Yahoo Finance (June 1, 2020) “My loved one died without a will – now what?”

Read more related articles at :

Florida Laws of Intestacy Succession

What Happens If You Die Without a Will?

Also, read one of our previous Blogs at:

What if I Don’t Have a Will in the Pandemic?

Click here to check out our Master Class!

 

Cares Act

Are You Making the Most of the SECURE and CARES Acts?

Are You Making the Most of the SECURE and CARES Acts?

The SECURE Act made a number of changes to IRAs, effective January 1, 2020. It was followed by the CARES Act, effective March 27, 2020, which brought even more changes. A recent article from the Milwaukee Business Journal, titled “IRA planning tips for changes associated with the SECURE and CARES acts,” explains what account owners need to know.

Setting Every Community Up for Retirement (SECURE) Act

The age when you have to take your RMD increased from 70½ to 72, if you turned 70½ on or before December 31, 2019. Younger than 70½ before 2020? You still must take your RMDs. But, if you can, consider deferring any distributions from your RMD, until you must. This gives your IRA a chance to rebound, rather than locking in any losses from the current market.

Beneficiary rules changed. The “stretch” feature of the IRA was eliminated. Any non-spousal beneficiary of an IRA owner who dies after Dec. 31, 2019, must take the entire amount of the IRA within 10 years after the date of death. The exceptions are those who fall into the “Eligible Designated Beneficiary” category. That includes the surviving spouse, a child under age 18, a disabled or chronically ill beneficiary, or a beneficiary who is not more than ten years younger than the IRA owner. The Eligible Designated Beneficiary can take distributions over their life expectancy, starting in the year after the death of the IRA holder. If your estate plan intended any IRA to be paid to a trust, the trust may include a “conduit IRA” provision. This may not work under the new rules. Talk with your estate planning attorney.

IRA contributions can be made at any age, as long as there is earned income. If you have earned income and are 70 or 71, consider continuing to contribute to a Roth IRA. These assets grow tax free and qualified withdrawals are also tax free. If you plan on making Qualified Charitable Distributions (QCD), you’ll be able to use that contribution (up to $100,000 per year) from the IRA to offset any RMDs for the year and not be treated as a taxable distribution.

Coronavirus Aid, Relief and Economic Security (CARES) Act

The deadline for contributions for traditional or Roth IRAs this year is July 15, 2020. The 2019 limit is $6,000 if you are younger than 50 and $7,000 if you are 50 and older.

RMDs have been waived for 2020. This applies to life expectancy payments. It may be possible to “undo” an RMD, if it meets these qualifications:

  • The RMD must have been taken between February 1—May 15 and must be recontributed or rolled over prior to July 15.
  • RMDs taken in January or after May 15 are not eligible.
  • Only one rollover per person is permitted within the last 12 months.
  • Life expectancy payments may not be rolled over.

Individuals impacted by coronavirus may be permitted to take out $100,000 from an IRA with no penalties. They are eligible if they have:

  • Been diagnosed with SARS-Cov-2 or COVID-19
  • A spouse or dependent has been diagnosed
  • Have experienced adverse consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to the virus, are unable to work because of a lack of child care, closed or reduced hours of a business owned or operated by the individual or due to other factors, as determined by the Secretary of the Treasury.
  • Note that these distributions are still taxable, but the income taxes can be spread ratably over a three-year period and are not subject to the 10% early distribution penalty.

Keep careful records, as it is not yet known how any of these distributions/redistributions will be accounted for through tax reporting.

Reference: Milwaukee Business Journal (June 1, 2020) “IRA planning tips for changes associated with the SECURE and CARES acts”

Read more related articles at:

The SECURE Act and CARES Act

5 Ways The CARES Act Impacts Retirement Planning

Also, read one of our previous blogs at:

How Does the SECURE Act Change Your Estate Plan?

Click here to check out our Master Class!

 

cares act

How the CARES Act has Changed RMDs for 2020

 

How the CARES Act has Changed RMDs for 2020

Before the CARES Act, most retirees had to take withdrawals from their IRAs and other retirement accounts every year after age 72. However, the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act, has made some big changes that help retirees. Whether you have a 401(k), IRA, 403(b), 457(b) or inherited IRA, the rules have changed for 2020. A recent article in U.S. News & World Report, “How to Skip Your Required Minimum Distribution in 2020,” explains how it works.

For starters, remember that taking money out of any kind of account that has been hit hard by a market downturn, locks in investment losses. This is especially a hard hit for people who are not working and won’t be able to put the money back. Therefore, if you don’t have to take the money, it’s best to leave it in the retirement account until markets recover.

RMDs are based on the year-end value of the previous year, so the RMD for 2020 is based on the value of the account as of December 31, 2019, when values were higher.

Remember that distributions from traditional 401(k)s and IRAs are taxed as ordinary income. A retiree in the 24% bracket who takes $5,000 from their IRA is going to need to pay $1,200 in federal income tax on the distribution. By postponing the withdrawal, you can continue to defer taxes on retirement savings.

Beneficiaries who have inherited IRAs are usually required to take distributions every year, but they too are eligible to defer taking distributions in 2020. Experts recommend that if at all possible, these distributions should be delayed until 2021.

Automatic withdrawals are how many retirees receive their RMDs. That makes it easier for retirees to avoid having to pay a huge 50% penalty on the amount that should have been withdrawn, in addition to the income tax that is due on the distribution. However, if you are planning to skip that withdrawal, make sure to turn off the automated withdrawal for 2020.

If you already took the distribution before the law was passed (in March 2020), you might be able to roll the money over to an IRA or workplace retirement account, but only within 60 days of the distribution. You can also only do that once within a 12-month period. If the deadline for a rollover contribution falls between April 1 and July 14, you have up to July 15 to put the funds into a retirement account.

For those who have contracted COVID-19 or suffered financial hardship as a result of the pandemic, the distribution might qualify as a coronavirus hardship distribution. Talk with your accountant about classifying the distribution as a COVID-19 related distribution. This will give you an option of spreading the taxes over a three-year period or putting the money back over a three-year period.

Reference: U.S. News & World Report (May 4, 2020) “How to Skip Your Required Minimum Distribution in 2020”

Read more related articles at:

How the CARES Act impacts your 2020 RMDs

CARES Act Drastically Changes Required Minimum Distribution Rules For 2020

Also, read one of our previous Blogs at :

Massive Changes to RMDs from Stimulus Plan

 

Retirement

What Do I Need to Retire?

Research from the Employee Benefit Research Institute’s Retirement Confidence Survey shows a lack of preparation in retirement planning. According to the annual survey, 66% of those 55 years and older said they were confident they had sufficient savings to live comfortably throughout retirement. However, just 48% within the same age group haven’t figured out their retirement needs.

Kiplinger’s article entitled “Ready to Retire? Not Until You’ve Done These 3 Things” says knowing where you are now and knowing what you’ll need and want in retirement are important to protect your portfolio throughout your golden years. If you want to retire at 65, then age 55 is when you’ll want to start making some important decisions.

Let’s look at three steps to take in your last decade of your working years to help create a safety net for a long retirement:

At 10 years or more before retirement, you should diversify your tax exposure. You may have a large portion of your portfolio in an employer sponsored 401(k) or in IRAs. These tax-deferred accounts give you plenty of benefits now, because you’re not taxed on the contributions. At age 50 and older, you can make additional catch-up contributions that let you put away $26,000 in 2020 in your 401(k) each year. Because you’re probably going to pay a lower tax rate in retirement when you begin taking taxable withdrawals, it gives you a nice tax advantage today.

In the years before your retirement, build assets in tax-free accounts for flexibility, so you can keep tax costs down in retirement. Assets in a Roth IRA or a Roth account within your 401(k) can give you a source of tax-free income in retirement. You paid taxes on the money you put into a Roth, so it grows tax-free and withdrawals after age 59½ are income tax free. If you’re over 50, then you can add up to $7,000 into the account this year.

When you are five years from retirement, create a health care plan. A huge expense in retirement is health care. Plan for out-of-pocket health care costs as well as long-term care. Taking advantage of a health savings account, if you’re in a high-deductible health insurance plan is a good way to save for the out-of-pocket health care expenses that won’t be covered by Medicare or your private health insurance. You can fund an HSA up to $7,100 for families ($8,100 if you’re 55 or older). Contributions are made on a pre-tax basis, so your account grows tax free, and withdrawals are tax- and penalty-free, if used for qualified health care expenses. You should also look at long-term care insurance.

When you’re just a year from retirement, start spending as if you’re already retired. Be sure you can live comfortably, when spending at your retirement budget.

No one can see the future, but you may be able to limit the effects of shocks to your retirement savings.  Adding in these layers of protection at least 10 years prior to retirement, can help you secure your retirement goals.

Reference: Kiplinger (Jan. 24, 2020) “Ready to Retire? Not Until You’ve Done These 3 Things”

Read More Related Articles at:

Signs You’re Ready to Retire

Ready, set, retire – 8 deadlines you need to know

Also, read one of our previous Blogs at :

RETIREMENT PLANNING IN JACKSONVILLE, FLORIDA

Retirement Planning and Declining Abilities

 

Family Estate Planning

Am I Making One of the Five Common Estate Planning Mistakes?

You don’t have to be super-wealthy to see the benefits from a well-prepared estate plan. However, you must make sure the plan is updated regularly, so these kinds of mistakes don’t occur and hurt the people you love most, reports Kiplinger in its article entitled “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes.”

An estate plan contains legal documents that will provide clarity about how you’d like your wishes executed, both during your life and after you die. There are three key documents:

  • A will
  • A durable power of attorney for financial matters
  • A health care power of attorney or similar document

In the last two of these documents, you appoint someone you trust to help make decisions involving your finances or health, in case you can’t while you’re still living. Let’s look at five common mistakes in estate planning:

# 1: No Estate Plan Whatsoever. A will has specific information about who will receive your money, property and other property. It’s important for people, even with minimal assets. If you don’t have a will, state law will determine who will receive your assets. Dying without a will (or “intestate”) entails your family going through a time-consuming and expensive process that can be avoided by simply having a will.

A will can also include several other important pieces of information that can have a significant impact on your heirs, such as naming a guardian for your minor children and an executor to carry out the business of closing your estate and distributing your assets. Without a will, these decisions will be made by a probate court.

# 2: Forgetting to Name or Naming the Wrong Beneficiaries. Some of your assets, like retirement accounts and life insurance policies, aren’t normally controlled by your will. They pass directly without probate to the beneficiaries you designate. To ensure that the intended person inherits these assets, a specific person or trust must be designated as the beneficiary for each account.

# 3: Wrong Joint Title. Married couples can own assets jointly, but they may not know that there are different types of joint ownership, such as the following:

  • Joint Tenants with Rights of Survivorship (JTWROS) means that, if one joint owner passes away, then the surviving joint owners (their spouse or partner) automatically inherits the deceased owner’s part of the asset. This transfer of ownership bypasses a will entirely.
  • Tenancy in Common (TIC) means that each joint owner has a separately transferrable share of the asset. Each owner’s will says who gets the share at their death.

# 4: Not Funding a Revocable Living Trust. A living trust lets you put assets in a trust with the ability to freely move assets in and out of it, while you’re alive. At death, assets continue to be held in trust or are distributed to beneficiaries, which is set by the terms of the trust. The most common error made with a revocable living trust is failure to retitle or transfer ownership of assets to the trust. This critical task is often overlooked after the effort of drafting the trust document is done. A trust is of no use if it doesn’t own any assets.

# 5: The Right Time to Name a Trust as a Beneficiary of an IRA. The new SECURE Act, which went into effect on January 1, 2020 gets rid of what’s known as the stretch IRA. This allowed non-spouses who inherited retirement accounts to stretch out disbursements over their lifetimes. It let assets in retirement accounts continue their tax-deferred growth over many years. However, the new Act requires a full payout from the inherited IRA within 10 years of the death of the original account holder, in most cases, when a non-spouse individual is the beneficiary.

Therefore, it may not be a good idea to name a trust as the beneficiary of a retirement account. It’s possible that either distributions from the IRA may not be allowed when a beneficiary would like to take one, or distributions will be forced to take place at a bad time and the beneficiary will be hit with unnecessary taxes. Talk to an experienced estate planning attorney and review your estate plans to make certain that the new SECURE Act provisions don’t create unintended consequences.

Reference: Kiplinger (Feb. 20, 2020) “Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes”

Read more related articles at:

5 Biggest Estate Planning Mistakes You Can Make

Is Anything Wrong with Your Estate Plan? Here are 5 Common Mistakes

Also read one of our Previous Blogs at:

Common Estate Planning Mistakes to Avoid

 

 

tax breaks

What are the Taxes on My IRA Withdrawal?

 

What are the Taxes on My IRA Withdrawal?

Investol?pedia’s recent article entitled “How Much Are Taxes on an IRA Withdrawal?” explains that the withdrawal rules for other types of IRAs are similar to the traditional IRA, with some small unique differences. Other types of IRAs include the SEP IRA, Simple IRA and SARSEP IRA. However, each of these has different rules about who can open one.

Tax-Free Withdrawals Only with Roth IRAs. When you invest with a Roth IRA, you deposit the money post-tax. Therefore, when you withdraw the money in retirement, you pay no tax on the money you withdraw, or on any gains your investments earned. That’s a big benefit. To do this, the money must have been deposited in the IRA and held for at least five years and you must be at least 59½ years old. If you need cash before that, you can withdraw your contributions with no tax penalty, provided you don’t touch any of the investment gains. You should document any withdrawals before 59½ and tell the trustee to use only contributions, if you’re withdrawing funds early. If you do not do this, you could be charged the same early withdrawal penalties charged for taking money out of a traditional IRA.

The Taxing of IRA Withdrawals. Money that’s placed in a traditional IRA is treated differently from money in a Roth, because it’s pretax income. Each dollar you deposit lessens your taxable income by that amount. When you withdraw the money, both the initial investment and the gains it earned are taxed at your income tax rate when withdrawn. However, if you withdraw money before you’re 59½, you’ll be hit with a 10% penalty, in addition to regular income tax based on your tax bracket. If you accidentally withdraw investment earnings rather than only contributions from a Roth IRA before you’re 59½, you can also incur a 10% penalty. You can, therefore, see how important it is to keep careful records.

Avoiding the Early Withdrawal Tax Penalty. There are a few hardship exceptions to the 10% penalty for withdrawing money from a traditional IRA or the investment-earnings portion of a Roth IRA before you reach age 59½.

Don’t mix Roth IRA funds with the other types of IRAs. If you do, the Roth IRA funds will become taxable. Some states also levy early withdrawal penalties. Once you hit age 59½, you can withdraw money without a 10% penalty from any type of IRA. If it is a Roth IRA and you’ve had a Roth for five years or more, you won’t owe any income tax. If it’s not, you will have taxes due.

The funds put in a traditional IRA are treated differently from money in a Roth. If the money is deposited in a traditional IRA, SEP IRA, Simple IRA or SARSEP IRA, you’ll owe taxes at your current tax rate on the amount you withdraw. However, you won’t owe any income tax, provided that you keep your money in a non-Roth IRA until you reach another key age milestone. Once you reach age 72 (with new SECURE Act), you’ll have to take a distribution from a traditional IRA. The IRS has specific rules about how much you must withdraw each year, which is called the required minimum distribution (RMD). If you don’t withdraw your RMD, you could be hit with a 50% tax on the amount not distributed as required.

There are no RMD requirements for a Roth IRA, but if money is still there after your death, your beneficiaries may have to pay taxes. There are several different ways they can withdraw the funds, so they should get the advice of an attorney.

Reference:  Investopedia (Feb. 21, 2020) “How Much Are Taxes on an IRA Withdrawal?”

Read more related articles at:

How Taxes on Traditional IRA Distributions Work

How Are IRA Withdrawals Taxed?

Also Read one of our previous blogs at :

Can I Place My IRA in a Trust?

 

What are the Penalty-Free IRA Withdrawals?

What are the Penalty-Free IRA Withdrawals?

What are the Penalty-Free IRA Withdrawals? Traditional and Roth IRA distributions can bring about a 10% penalty, if you take them too soon. However, there are several early-withdrawal exceptions that will let you avoid the fine.

Investopedia’s recent article entitled “9 Penalty-Free IRA Withdrawals” examines some IRA withdrawals that can be made during retirement.

The IRS will hit you with a 10% penalty on an early IRA withdrawal to motivate you to keep your retirement savings intact. However, you may be able to get around the penalty in some situations. Here are nine circumstances where you can take an early withdrawal from a traditional or Roth IRA without being penalized.

  1. Unreimbursed Medical Expenses. If you don’t have health insurance, or you have out-of-pocket medical expenses that aren’t covered by insurance, you may be able to take penalty-free distributions from your IRA to pay for these expenses. To be eligible, you must pay the medical expenses during the same calendar year you make the withdrawal. Further, your unreimbursed medical expenses must the more than 10% of your adjusted gross income (AGI).
  2. Health Insurance Premiums During Unemployment. If you’re unemployed, you may take penalty-free distributions from your IRA to pay for health insurance premiums. For the distributions to be eligible for the penalty-free treatment, you must satisfy these conditions:
  • You lost your job
  • You received unemployment compensation for 12 consecutive weeks
  • You took the distributions during either the year you received the unemployment compensation or the next year; and
  • You received the distributions no later than 60 days after returning to work.
  1. Permanent Disability. If you become permanently disabled and can no longer work, you can withdraw money from your IRA without the 10% penalty. You can use the distribution for any reason. Just remember that your plan administrator may need you to provide evidence of the disability, prior to approving a penalty-free withdrawal.
  2. Higher-Education Expenses. You may be able to avoid the 10% penalty, when you use IRA funds to pay for qualified education expenses for you, your spouse, or your child. These qualified education expenses include tuition, fees, books, supplies and equipment required for enrollment. Room and board are also approved for students enrolled at least half-time.
  3. An Inherited IRA. If you’re the beneficiary of an IRA, your withdrawals aren’t subject to the 10% early withdrawal penalty. However, this exception doesn’t apply if you’re the spouse of the original account holder, you are the sole beneficiary and you elect a spousal transfer (rolling over the funds into your own non-inherited IRA). In this instance, the IRA is handled as if it were yours, to start, which means the 10% early withdrawal penalties still are applicable.
  4. To Buy, Build, or Rebuild a Home. You can withdraw up to $10,000 (which is a lifetime limit) from your IRA without penalty to buy, build, or rebuild a home. To be eligible, you must be a “first-time” homebuyer, (which means that you haven’t owned a home in the previous two years). However, you could have been a homeowner in the past and still qualify as a first-time homebuyer today. If you’re married, your spouse can add an additional $10,000 from his or her IRA. You can also use the money to assist your child, grandchild, parent, or other family members, as long as they meet the first-time homebuyer definition.
  5. Substantially Equal Periodic Payments. If you need to make regular withdrawals from your IRA for several years, the IRS lets you to do so penalty-free, if you meet certain requirements. Therefore, you withdraw the same amount—determined under one of three IRS-pre-approved methods—each year for five years or until you turn 59½, whichever one comes later. This is referred to as taking substantially equal periodic payments (SEPPs) from your IRA.
  6. An IRS Levy. If you have unpaid federal taxes, the IRS can use money in your IRA to pay the bill. The 10% penalty won’t apply, if the IRS levies the money directly.
  7. Active Duty. Qualified reservist distributions aren’t subject to the 10% penalty. In some instances, you may be able to repay the distributions, even if the repayment contributions exceed annual contribution limits. However, you are required to do so within two years of the end of active duty.

While if the circumstances discussed here are exempt from the early-distribution penalty, they still may be subject to federal and state tax. To claim the early-distribution penalty exception, you may be required to file IRS Form 5329 along with your income tax return, unless your IRA custodian reports the amount as being exempt on IRS Form 1099-R.  That explains What the Penalty-Free IRA Withdrawals are.

Reference: Investopedia (Jan. 20, 2020) “9 Penalty-Free IRA Withdrawals”

Read more about this at:      11 Ways to Avoid the IRA Early Withdrawal Penalty/USNews

 Traditional IRA Withdrawal Rules /charles Schwab

And read one of our previous blogs at:    Making an IRA Part of the Estate Plan

IRA COUPLE

Am I Better Off Investing Earlier in My IRA?

Am I Better Off Investing Earlier in My IRA? Remember that you’re able to make an IRA contribution for a given year anytime between January 1 and the tax-filing deadline of the following year (usually April 15). That means that you can make a 2020 IRA contribution between Jan’ 1, 2020, and April 15, 2021. However, don’t wait. Why not?

Vanguard’s recent article entitled “IRA contributions: The earlier, the better” notes that you invest to earn money, and the amount of money you earn depends primarily on three factors—two you can control.

  1. Investment performance. There’s no way to control investment performance and all investing involves risk. The main cause of risk is market movement, which impacts your investment earnings.
  2. The amount you invest. You earn your money with compounding, when your investment earnings make their own earnings. If you contribute more, you have more money to generate earnings. That means you have more earnings to generate additional earnings. You can control the amount you invest, provided you keep within the annual IRA contribution limit.
  3. Your investment timing. If you wait until April to make an IRA contribution, you’ve missed 15 months of compounding, so if you have the financial flexibility to decide when you contribute to your IRA, do it ASAP.

As an illustration, let’s imagine that you invest $5,500 in your IRA each year for 30 years, and your average annual return is 4%. In Situation A, you make a lump-sum investment every January, and your end balance is $323,967. That includes $158,967 in earnings. In Situation B, you make a lump-sum investment every April and your end balance is $308,467. That includes $143,467 in earnings, which is $15,500 less than you’d earn in the first scenario. In each situation, you’re contributing a total of $165,000 to your IRA over the span of 30 years.

This illustration shows some what-if scenarios that aren’t always possible to do in real life. For instance, you may not be able to invest the same amount each year or have to skip a few years. However, you should make small steps toward saving 12%–15% of your gross income (including employer contributions) every year. If you don’t have the financial flexibility to make a lump-sum investment in your IRA—in January or April (or in any other month as a matter of fact), try to set up recurring automatic bank transfers. If you make bi-weekly contributions over the course of 30 years (for a total contribution of $165,000) and earn a 4% average annual return, the end balance is smaller than Situation A but larger than Situation B.

However, remember that you can’t contribute more than you’ve earned for the year.

Reference: Vanguard (Jan. 21, 2020) “IRA contributions: The earlier, the better”

Read more about this at: When is the Best Time to put money in your IRA-Forbes

   The Best Age to Open an IRA and start investing

Also read our previous blog at:    Can I Place My IRA in a Trust?

 

Credit Card Debt

Does My Mom Have to Pay My Dad’s Credit Card Debt after He Dies?

Does My Mom Have to Pay My Dad’s Credit Card Debt after He Dies? When a family is grieving after the death of a loved one, the last thing any of them wants to deal with is unpaid debts and debt collectors.

nj.com’s recent article asks “Is mom liable for my dead father’s credit card debt?” The answer: generally, any unpaid debts are paid from the deceased person’s estate.

In many states, family members, including the surviving spouse, typically aren’t required to pay the debts from their own assets, unless they co-signed on the account or loan.

All the stuff that a person owns at the time of death, including everything from money in the bank to their possessions to debts they owe, is called an estate. When the deceased person has debt, the executor of the estate will go through the probate process.

During the probate process, all the deceased’s debts are paid off from the estate’s assets. Some assets—like retirement accounts, IRAs and life insurance proceeds—aren’t included in the probate process. As a result, these accounts may not be available to pay creditors. Other assets can be sold to pay off outstanding debts.

A relative or the estate executor will typically notify any lenders, like credit card companies, when that person passes away. The credit card company will then contact the executor about any balances due. Note: the creditor can’t add any additional fees, while the estate is being settled.

If there’s not enough money in the estate to cover credit card balances, the card issuer may have no recourse. The executor and the heirs aren’t responsible for these debts. Unlike some debts, like a mortgage or a car loan, most credit card debt isn’t secured. Therefore, the credit card company may need to write off that debt as a loss.

You should start learning about the probate process in your state to have the best defense for dealing with creditors and debt collectors.

So, Does My Mom Have to Pay My Dad’s Credit Card Debt after He Dies?

If you need help, talk to an experienced estate planning attorney.

Reference: nj.com (Jan. 15, 2020) “Is mom liable for my dead father’s credit card debt?”

Read more about this subject at:

Can I be responsible to pay off the debts of my deceased spouse?

What Happens to Credit Card Debt When You Die?

And read one of our Previous Blogs at:

Who Will Cover My Debt When I Die?

 

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