Hi! Sorry if this is a stupid question or not the best place to post it, I'm very young and new to this (handling money) and I have less than 0 idea what I'm doing. To preface, I'm in Washington state.
My mom died in the middle of last year. I was given a letter by my grandparents detailing her credit card debt and they just outright told me I had to pay it, but after looking into it I'm not so sure and I can't seem to find a straight answer. It's specifically credit card debt, and the debt collector is SIMM assoc. I got a pretty hefty payout from her life insurance, but it was a long and complicated process to get to that point and claim the money.
It says in the letter that it's to her estate. My grandmother thinks that means I'm now responsible for paying it since I claimed the life insurance money. I looked it up and that generally doesn't seem to be the case, but I figured I'd try and ask people who (maybe) know better to clear things up just because I don't want to be wrong about something like this. Again, sorry if it's a stupid question, I'm just kind of confused and overwhelmed about this whole ordeal. If more info is needed I can probably provide it. Thanks!
Edit: Should be noted that she didn't have a will and I had to go out of my way to claim the life insurance money
Another edit for clarity: I'm not worried about anyone or anything else taking the life insurance money, I already have it in my bank account and have the personal details worked out. I was wondering, in short, if me taking out the money made me responsible for paying off her credit card debt, because that's what was told to me
Mother died with credit card debt & I got the money from her life insurance; Do I have to pay it now?
byu/meeelowo inpersonalfinance
Posted by meeelowo
25 Comments
The life insurance money is yours – it doesn’t go through the estate so you’re not responsible for her debts. Your grandma is misinformed about how this works
Tell SIMM to pound sand and don’t give them a penny of your insurance payout
Not legal advice: If you are the beneficiary of the life insurance then it should be outside probate. Creditors will have a claim to assets within probate. It is important to determine whether you were a beneficiary or not here.
The insurance payout is not the estate. It pays out directly to the beneficiary, in this case you. That means your mother never had possession of the money, and it was never hers. Do not pay that debt. They can’t go after you for it, but they might harass you. If you pay at all, then the debt will be legally transferred to you. Tell the CC company to take a short hike down a tall mountain. They can try to take it from the estate, but they could also try to squeeze blood from a stone, from the sounds of things.
Whatever you do, don’t pay it. They will harass you and tell you that you have an obligation to pay it. What they don’t say is that obligation is a moral one, not a legal one. And since they already lack morals, they do not deserve to be extended any. After my grandmother died they called my father for months trying to get him to pay her debts.
Spend it all quick and there’s no paper trail. Big ticket.
EDIT: getting pushback – go small ticket
No you are not responsible for her debts. Her estate is and the life insurance is not part of the estate.
Doesn’t a life insurance policy HAVE to name a beneficiary? Some one or some thing.
When my dad died decades ago, a Las Vegas casino called and said my dad owed them $10,000. I said they’d have to break my fingers cause we don’t have any money. The guy says, “We don’t do that anymore and will write it off.”
Good luck, I wouldn’t pay at least out of insurance.
OP are you the Executor of the estate?
Her outstanding debts should be paid by her estate. Whoever was appointed as executor and had access to her bank accounts, savings, etc after her death should be handling it. Do you know who that person is? Are you her sole heir?
Life insurance payout is yours. Please look into HYSA (high yield savings account) so you’re at least getting a decent interest rate.
tell them to send proof that YOU owe the debt. If they can’t prove its your debt, ignore them. (read up on debt collectors – they have to prove the debt, or you can tell them to pound sand. In this case, they not only have to prove the debt, they have to prove its your debt, or that you are the executor of the estate. Which you arent. thats part 1. Part 2 is even if, by some miracle they cleared that hurtle, i would still ignore them. it will hurt your credit for a few years – but so what???
When my brother died the first CC company told me they have a deceased fund that they would pay it out of. I would not pay and request they use that fund instead. Every CC company that called I told them that and they said ok. Was the last I heard from them.
Absolutely not. Her estate will be settled and whatever’s left (if any) her heirs will get… if she’s left owing money, you do not need to pay anything.
I especially don’t worry about upsetting a credit card company. Credit cards are unsecured debt at high interest rates to keep them profitable even when some of that debt can never be collected.
Credit card companies know a tiny percentage of customers will die with no one to go after for the money. They hire a collection company to try in hopes someone with no actual obligation will be foolish enough to pay up.
IANAL, but:
1. Unless you were listed as a responsible party on your mom’s credit card you are not responsible for her debt. The estate is responsible for paying her debts, not you.
2. In most cases, life insurance payouts are NOT PART OF THE ESTATE, meaning the benefits go directly to you. They are not paid from the estate.
3. Since you’re getting contradictory advice from your family, it wouldn’t hurt to get a brief consult with an estate attorney. Probably something you could do over the phone in 30 minutes.
First off, I’m sorry for your loss. Dealing with this stuff while grieving is overwhelming
You almost certainly don’t owe this debt. Life insurance payouts go directly to the named beneficiary. They do NOT pass through the estate. That money is yours, not your mom’s estate’s. Children are not responsible for their parents’ debts unless you co-signed on the account (which it doesn’t sound like you did). The debt collector sent the letter to “the estate” because they’re trying to collect from any assets your mom left behind. But the estate and YOU are separate. If your mom had no assets (house, car, bank accounts in her name alone), there may be no estate to collect from and that’s not your problem. Your grandparents are wrong. I’m sure they mean well, but receiving life insurance does not make you liable for her debts. That’s not how it works. Do NOT pay anything or verbally agree to pay. Even a small “goodwill” payment can sometimes be used to reset the statute of limitations or imply you’re accepting responsibility.
Do not pay even a single penny towards her debt. Any amount could be construed as you obtaining the obligation. Unless a court or legal representative tells you you are responsible for it let the debt go.
I think you’ve gotten good advice here.
I just want to add, be very smart with the payout. Money is a drug and it makes it hard to think clearly and unemotionally. Don’t ever feel like you’re in a rush to do something and think it through.
You are not responsible for credit card debt! Just call them and tell them she died. They may ask if she has an estate but my mom didn’t and I haven’t heard from them since
If you were not a named beneficiary *or* the terms of the life insurance “defaulted” a beneficiary structure (spouses –> children –> parents –> siblings) the estate likely was the beneficiary. If the check was written to you (and not “the estate <your mom>”) this means it bypassed the probate process.
Any assets that could be liquidated of value – jewelry, cash, cars, real estate, etc that is going through probate *could* be claimed by the insurance company as a creditor. Definitely hire an attorney to avoid troubles. A couple thousand bucks will go a long way to just answer a few questions.
You are not your mother’s Estate, even if you are the executor of your mother’s Estate. Her Estate is a separate legal entity, much like a corporation is a legal entity that can buy and sell property but is not a human being, and when your mother passed away her estate was created automatically as an operation of law and obtained all her assets and liabilities; basically the estate is a legal fiction that represents a person once they pass away, as a means of properly dispensing with their property. Any debts owed by your mother are now owed by the Estate and nobody else; any property or money she owned at the time of her passing are now owned by the Estate. The job of the executor is to settle the estate’s assets, whether its delivering those assets to her heirs, paying off debts, collecting rents and incomes, etc, but the executor is not personally responsible for any of the estate’s debts or entitled to any of the estate’s assets (unless provided for by a will or by law, and usually an executor is entitled to a reasonable fee for services rendered to the estate that supersedes most debts.)
Life insurance is separate from the estate. That money goes to the beneficiaries of the insurance policy, and once its paid out thats it, it belongs to the beneficiary and the estate’s creditors have no claim against it.
If your mother passed with no assets, then the credit card companies are out of luck. But that kind of risk is factored into their interest rates and fees.
You should probably consult with an estate attorney about your particular situation. You can probably pay one a few hundred dollars to review your status just for the peace of mind. But in general the answer would be that your mother’s credit card companies have no claim on the money you received from your mother’s insurance. That money is yours.
The debt is owed by her estate. It isn’t your debt. Period.
But was the life insurance payout an asset of the estate or is it simply yours as a beneficiary? That is worth a quick conversation with an estate attorney.
Just went through this. You don’t have to pay it, the estate does. The life insurance is yours and yours alone.
WA estate planning attorney here but not yours. This is a legal question not a personal finance one. Creditors can absolutely go after assets that have been beneficiary designated outside the estate. This is true in every state and anyone who tells you differently obviously doesn’t grasp the nuances of creditor collection rights. That said, most states do specifically exempt a small handful of certain assets from creditor claims, and life insurance death is often one. WA’s protection can be found under RCW 48.18.410.
So there’s a few factors here. I can chime in as someone that was an executor of an estate last year.
If the CC debt is in your mother’s name, and ONLY your mother’s name, then the CC company can come after the estate. They can’t come after anything that was POD (paid-on-death) such as bank accounts, savings accounts, etc that had POD beneficiaries.
They could come after anything else in the estate, such as the house, value of cars, etc. Anything that goes through probate could be touched by creditors. For example, if the house had a mortgage, the mortgage has to be settled before the estate can close.
As far as CC debt is concerned, that could/should have been paid prior to the estate “closing.” If you went through probate (if), there is 90-120 window where creditors can file a claim against the estate. If probate occurred and the CC company missed that window, they are SOL. There’d be nothing left in the estate anyway.