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Wednesday, June 19, 2013

When your parents die in debt, kids do not come first

There is an article in the Financial Post that talks about the fact that seniors often die with debts. The main point of the article is that the surviving spouse and kids are not responsible for the deceased's debts if the debts were only in the name of the deceased. Click here to read the article. 

While I found the article good over all, I have to add that I absolutely do NOT agree with the advice given by Murray Morrison. His quote seems to suggest that if your parent passes away leaving debts, you have the option of taking assets from the estate and spending them to bankrupt the estate. Don't do this. The law is clear that debts, taxes and expenses must be paid before the beneficiaries receive anything.

3 comments:

  1. This seems crazy to me. It gives people a huge incentive to rack up lots of debt, live high on it, and then check out (die) without ever paying it back. Not everyone cares about leaving something for loved ones.

    Also, it seems like it penalizes responsible people who pay their bills. The debt ultimately gets spread around - no way creditors are *really* accepting these losses.

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    Replies
    1. Hi pinkpearl,

      I suppose it does give people incentive to rack up lots of debt and check out without paying. But when you look at the alternative - which is making the surviving family pay for that person's carelessness - that doesn't seem right either.

      Not all creditors take the hit happily. I know for a fact that many creditors will write demand letters to widows and widowers, telling them they are responsible for their deceased spouse's debts, even when they are not. Most people will just pay up rather than go see a lawyer to see if it's really true, as they assume the creditor wouldn't demand it if they weren't legally entitled.

      Lynne

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  2. Another alternative is to tighten up the access to credit.

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