What happens to debt when someone dies?

When you live in New York and someone gives you the responsibility of handling his or her affairs after he or she passes, you will need to take certain steps to do so while you manage your loved one’s estate. This might include paying off debts, making distributions to beneficiaries and so on, but what happens when the person who dies leaves considerable debt behind?

According to U.S. News & World Report, one out of every five Americans has  credit card debt he or she believes he or she will never be able to pay off, and that means more and more U.S. residents are dying without covering their debts. If your loved one had enough to cover those debts tied up in other assets, it should not be difficult to pay that debt off, but when someone dies with debt he or she cannot cover, what happens next depends on the type of debt accrued.

If your loved one left behind substantial credit card debt, for example, and he or she does not have other assets to help cover the debt, you should not have to worry about being responsible for it in most cases. There is, however, an exception to this. If you co-signed on the credit card, you may be on the hook for the balance, but otherwise, think twice before letting credit card companies guilt or pressure you into paying.

If your loved one passed away and left behind, say, automotive debt, you can either take over the payments for the vehicle or let the bank take it back. In the case of mortgage debt, you may be able to hang on to your loved one’s property by taking over the payments yourself. Otherwise, the bank will typically foreclose on the property eventually.

This information about what happens when someone dies with debt seeks to inform you, but it is not a replacement for legal advice.

5 mistakes estate executors must avoid

As the executor of an estate, you’re staffed with more responsibilities than you probably realize. By taking a high level overview of the situation early on, you’ll soon understand what you’re up against and how to move through the process in an efficient manner.

The one thing you never want to do is make a costly mistake. Fortunately, when you protect against these in advance, there’s less chance of running into trouble.

Here are five mistakes estate executors must avoid :

  • Agreeing to be the executor if you’re not comfortable: When someone asks you to be the executor of their estate, you have the right to say no. You don’t have to agree, even if you’re close with the person. Furthermore, even if you do agree, you can still turn down the responsibility when the time comes.
  • Neglecting to review the trust or will in great detail: You shouldn’t do anything as an executor until you are 100 percent sure of what the trust or will says. If there is any gray area, clear it up before pushing forward.
  • Jumping the gun with distributions: You’re in a hurry to complete the process, so it’s easy to get ahead of yourself by making distributions too soon. For example, if you make distributions before paying all liabilities, you could be held personally responsible.
  • Forgetting to advertise the estate: It’s common to overlook this detail, but it’s your job to advertise the estate so that creditors understand what’s happening and how to take action.
  • Neglecting to close out the estate: You put so much time into the process itself that you forget to close everything down at the end. For instance, you may need to go through the court system so a judge can approve all of the distributions you’ve made.

Even though these potential mistakes are scary, with the right approach you should be able to hedge them off before they become a problem.

It’s a big responsibility, as well as a great honor, to act as the executor of an estate . When the time comes to take action, learn more about the process, your responsibilities and your legal rights. The knowledge you gather will help you every step of the way.

How guardianships and conservatorships differ

As a resident of New York who is watching your parents age, you may have firsthand knowledge of just how difficult it can be to do so. Watching your parents grow older can prove even more difficult when one of them starts suffering physical or mental hardships, as some conditions can make it increasingly tough for your parents to make sound decisions and otherwise care for themselves. At the law office of Joseph A. Ledwidge, P.C., we are familiar with the types of circumstances that may lead you to consider a guardianship or conservatorship over an aging parent or other loved one. We have helped many clients facing similar situations find long-term solutions that meet their needs.

According to the Motley Fool,  guardianships and conservatorships are similar to each other in that they both involve giving someone decision-making power over someone else who is unable to manage their own affairs. There are, however, some key distinctions between the two, and understanding how they differ may help you determine whether a guardianship or conservatorship may better suit you and your family’s unique needs.

The short answer to what differentiates guardianships from  conservatorships is that guardianships give someone power over another with regard to personal and health care-related affairs, while conservatorships grant someone power over someone else’s financial affairs. For example, a guardianship typically gives you the power to make decisions regarding medical decisions, living arrangements and so on for someone a court considers to be incompetent or incapacitated.

A conservatorship, meanwhile, allows you to handle the bank accounts, debts and related financial affairs of someone who is incompetent or incapacitated. You can find more on this topic by visiting our webpage.

Coordinating a long-term care plan that people understand

Long-term care planning is not generally a topic that people in New York are itching to discuss with their loved ones. Often, the people who will need it the soonest, may not recognize how critical planning ahead actually is. They may also neglect to clearly define their expectations to those who they want to participate in their care. Likewise, the people listed in another person’s long-term care plan may have an inaccurate understanding of their responsibilities or be unfamiliar with where to find critical documents that disclose vital information. 

When families have a loved one who is getting close to needing a reliable long-term care plan, it is essential that they work together to coordinate something that is understood by all of the parties involved. According to Money , many children of aging adult parents say they have never had a conversation with their parents about a long-term care plan even though 69 percent of those parents say they have had that discussion with their children. This disconnect can lead to disappointment, confusion and contention if there are misunderstandings when the time comes that the long-term care plan is needing to be put to use. 

Forbes Magazine  says many people put off long-term care planning because they do not fully understand just how critical such a plan is. People think they have a clear understanding of the costs of a long-term plan when in reality, those costs are much higher. Additionally, in a survey that was conducted, only 33 percent of the people who were surveyed admitted that they would need a long-term care plan. However, in reality, over 65 percent of the people surveyed would end up needing a long-term care plan. 

How is a power of attorney different from a living will?

New York estate planning experts often recommend that you establish both a power of attorney and a living will. The two documents are similar to one another in that they both pertain to end-of-life issues and how your health care will proceed in the event that you become incapacitated and are unable to make such decisions for yourself. 

According to FindLaw, when you give someone a  power of attorney , you authorize that person to make medical decisions for you if you are unable to make them yourself. You may choose to set limits on your power of attorney, allowing your attorney-in-fact to make only certain decisions in regard to your medical care, or you can grant them broad authority to handle any issue that arises in regard to your end-of-life decisions. While individual documents may vary, the decision powers typically granted to someone with a power of attorney include the ability to make decisions in regard to the following:

  • Doctors you can see
  • Medical facilities where you can receive treatment
  • Going to court over what medical treatment you will receive
  • Handling of your body following your death

However, a living will takes precedence over even the most comprehensive power of attorney. In the event that you become mentally incapacitated, permanently unconscious or suffer a debilitating injury, your living will document specifies the medical care that you wish to receive. Conversely, you may also specify which, if any, treatments you do not want to receive in the event of your incapacitation. For example, you may wish to receive palliative or comfort care so that you do not suffer pain at the end of your life, and at the same time, you may also issue a do-not-resuscitate directive that specifies that you do not wish to receive CPR in the event that you stop breathing and/or your heart stops beating. 

While your attorney-in-fact has the authority to make health care decisions for you under your power of attorney, under no circumstances can he or she make a decision that violates the wishes you express in your living will.

The information in this article is not intended as legal advice but provided for educational purposes only.