Do I Have to Pay Mom’s Debt With My $1M Life Insurance Payout?
My mother handed away final 12 months with plenty of debt in her property. This debt features a mortgage, IRS tax liens, bank card money owed and different heirs who would should be notified of her property. The property seems to be in debt just under $200,000 with no different belongings obtainable to pay for these money owed.
Unknown to me, my mother made me the only beneficiary underneath a number of insurance coverage insurance policies (nicely over $1 million), together with her lifetime pension/annuity. Per her final needs, via video recordings, she didn’t need some other members of the family to be notified of her demise, not even my different half siblings. She mentioned that I ought to merely stroll away from all of the money owed, and all different belongings, together with the mortgage.
I’ve finished precisely as she wished, by submitting all claims and paperwork, together with the lifetime pension/annuity that I’m now receiving. All proceeds from these claims are actually deposited into my very own private accounts as the only beneficiary.
The one liquid money that she had was $3,000 in a checking account with no financial savings or different supply of funds. Your entire contents of her property amounted to round $5,000 of non-public belongings. Presently the home has gone via foreclosures, together with all of the furnishings and private belongings left inside.
I’ve not made any effort to inform any debt collectors and or any events who would have a declare as a creditor, together with any heirs or members of the family. (Our household has had a foul relationship for over 10 years, and I used to be the one one who stored involved.) I additionally haven’t filed any of her tax paperwork for the prior 12 months for her closing taxes. Her closing paychecks have been issued out to the property, round $9,000, and would want to undergo probate.
I’ve basically walked away from every little thing as she has instructed, besides to comply with via with submitting claims for each the insurance policies and her annuity. My major query is, will I be chargeable for something due underneath her title reminiscent of again taxes or some other obligations that would pop up sooner or later?
I’ve already requested two attorneys however each of them have merely mentioned that I can stroll away. However I’ve some reservations in doing so, because it simply doesn’t really feel regular. As the only beneficiary of each the insurance policies and lifelong annuity, am I obligated to pay any taxes or liens that will current themselves sooner or later?
-J.
Expensive J.,
Perhaps this doesn’t really feel regular as a result of it’s an uncommon state of affairs. So as a substitute of specializing in what’s regular, let’s give attention to what’s proper.
Your mom’s property is liable for paying her money owed, together with the taxes she owed. So long as she didn’t title you because the property’s executor and also you didn’t co-sign for her debt, you don’t have any obligations right here.
Had your mom left you cash in her will, it’s unlikely that you’d have gotten something. Probate courts normally require that collectors be paid in full earlier than heirs get a dime.
However as you most likely know, some belongings — together with the life insurance coverage insurance policies and lifelong annuity you acquired — bypass probate altogether and go on to the beneficiary. The cash can’t be seized by collectors, and also you don’t have to fret about taxes or liens. (There are some exceptions for spouses in group property states who inherit belongings via beneficiary designation, however clearly that doesn’t apply right here.)
The underside line: This cash is 100% yours. You’re not legally or morally liable for your mom’s debt.
I feel the grey space right here considerations your relations. I get that your mom instructed you to not notify them of her demise. However if you happen to merely acquired this communication through a video message, you didn’t conform to something. Until your siblings did one thing actually egregious to your mom that resulted in estrangement, notifying them of her demise looks as if the humane factor to do.
That doesn’t imply it is advisable to get into particulars of your mother’s property or the cash she left you. You can ship them an electronic mail letting them know of her demise. In the event that they assume they’ve a declare as a creditor, they’ll take it up with the probate courtroom. In the event that they ask for extra data, you possibly can inform them truthfully that you simply’re not concerned with the property.
Not like belongings that undergo probate, cash that’s transferred through beneficiary designation sometimes stays out of the general public report. So if you happen to notify your siblings of your mom’s demise, it’s uncertain they’d know concerning the cash you acquired except you advised them about it.
Solely you possibly can determine whether or not it’s applicable to go in opposition to your mom’s needs and notify your loved ones of her demise. However you don’t have to fret about paying off her debt. That cash belongs to you, not your mother’s collectors or the IRS.
Robin Hartill is a licensed monetary planner and a senior author at The BaghdadTime. Ship your tough cash inquiries to [email protected] or chat along with her in The BaghdadTime Neighborhood.
