Tag: Probate

Creditors and Senior Citizens: Lying in Wait to Steal from your Heirs.

Everyone has an idea about the legacy they wish to leave behind.  What that legacy is in reality and what you want it to be can be two different things. Is your legacy to your kids an encounter with your unpaid creditors?

Often, problems with creditors for people over 65 may not be problems the elderly debtor at all. Most types of income and assets are protected by law from creditors.

Usually though, that doesn’t bother creditors.  They’ll just wait until you’re dead to steal your assets from those you wish to inherit from you. 

Seniors enjoy protection from collection

Elders  in Georgia have significant legal protections from creditors.  Exemption laws, pension law, and the Social Security Act often make it hard for creditors to seize the assets of elders, even to pay legitimate debts.

People often make the argument against seniors filing bankruptcy because of the following reasons. 

  • Social security is 100% protected from creditors (unless you owe the government).
  • Your Pensions and other retirement accounts are beyond the reach of even those with a judgment against you. 
  • Houses are not liquid assets and it’s extremely difficult for creditors to make you sell your house.
  • Seniors usually don’t have an income outside of these aforementioned sources so there’s nothing to garnish.

Because of these generous protections, senior citizens often ignore debts and use their money to pay for today’s expenses, at the expense of what they’ll leave their heirs. 

However, just because you can ignore old debt, is that really a part of the legacy you wish to leave behind?

Some debts outlive the debtor

So, what happens when you die? Does the debt go to the grave with you?  Turns out, the debt lives on.

That doesn’t mean your heirs inherit your debt; in other words, your heirs don’t become personally liable for your credit card balance.

What many people don’t realize is that debts are paid in full before heirs will receive anything.

As per probate laws, debts are paid before the estate is distributed to your heirs.  If the deceased created a living trust, the trust usually provides that the successor trustee pay the deceased’s debts first.

When debts survive the debtor, the intended heirs inherit a significantly diminished estate, or a ticking time bomb of debts that are owed to the deceased person’s creditors.

Creditors lie in wait

Everyone has heard about interest. Interest is a creditors best friend. Interest on outstanding debt is often meaningless to the senior citizen who can avoid paying it while they’re alive. The downside to this is the fact that time and interest silently eats up the senior citizen’s estate.

Who cares if there aren’t any real viable means of collection.

Waiting works for a creditor.

  • Wait til the senior dies.
  • Wait while the interest compounds.
  • Wait til the records conveniently get lost.

Creditors are often adept at lying and manipulation. They will work hard at making your heirs feel guilty and convince them to pay off the debt from their own pockets after you’ve passed on.

The generosity gene

The impulse to pass along something to your children seems to be genetically implanted in the human soul. It’s something that drives many seniors to live frugally, save and work hard. But under our legal system, paying debts is higher priority than leaving something behind for your heirs.

Despite arguments to the contrary, bankruptcy is not only appropriate for a senior with debts and assets that are protected from creditors during their lifetime, but highly advisable. 

The exemptions that protect the assets under state law and the laws that made the senior judgment proof to begin with are also there to protect you should you file bankruptcy.

Without filing bankruptcy, all the exemptions will do is just hold the creditors off during the life of the debtor.  That debt will lay in the grass, hiding like a snake, waiting to collect from your estate and ultimately, your heirs. 

Another thing you have to remember is that bankruptcy exemptions vastly more generous than probate exemptions. In fact, unless there is a surviving spouse, there may be no exemptions in probate at all. Exemptions are designed to protect the surviving spouse, not their heirs. 

Bankruptcy flips the equation

A bankruptcy, by its very nature, eliminates unsecured debts. Things like credit cards and medical bills are magically gone, while the exemptions protect assets.

One a debt is discharged that debt is gone, forever, never to be heard from again. Bankruptcy law returns complete and total ownership of exempt assets back to the debtor.

Your Social Security payments both current and future, doesn’t even enter the bankruptcy equation.  All of your Pensions and 401(k)s are also not subject to the bankruptcy. 

One thing you need to know is that in order to successfully pass your assets on to the next generation by using bankruptcy, you need a good bankruptcy lawyer who doesn’t dabble but actually KNOWS the law. It’s hard work and requires planning but the results are worth it.

By eliminating your debts before you die, there’s more left for your family, and that’s always a good thing. 

Don’t Make and Estate Planning Mistake

In life, it’s easy to make a mistake. Estate planning is one of the most important things you can do in life.  It should be taken very seriously in order to avoid hassles or other delays that can come when you probate your will and begin transferring assets to family and friends.  With the correct planning, most people are able to avoid the costly mistakes that can lead to a prolonged and painful probate battle.

One of the most common estate planning mistakes you can make is adding a friend or young family member’s name to a joint account.  You may think that it will make it easier to transfer assets or even pay final expenses. Often that isn’t true. It can cause confusion about your intentions once you pass and can complicate the probate process.  It could also open you up to potential unscrupulous conduct by those you put on your account. The better alternative would be to give a trusted person a power of attorney to make financial decisions on your behalf in the event that you are unable to.

Another common mistake is not updating beneficiaries.  By having the wrong beneficiaries listed on bank accounts, life insurance policies and retirement accounts you can prevent your assets from being transferred to your intended beneficiaries. Often, individuals will create a single will and never bother with  updating it when major life events happen like having children or grandchildren, divorcing or remarrying or the death of a loved one. If you don’t update your will when these types of things happen your estate could essentially become intestate and you could be setting your heir up for a legal fight or a situation where the state itself decides what happens to your assets.

Out of all the mistakes listed above, the biggest mistake is having no plan at all.  Yes, there are legal mechanisms that will provide for your surviving spouse and your children and grandchildren but the state can’t possibly understand all your wishes and what you wanted may ultimately not happen.  Estate planning is essential to your piece of mind and also to those family members and friends who will survive you. If your estate plan is lacking, contact the caring and competent attorneys at Harmon and Gorove today for a free consultation about what your estate planning options are.  

Dying Without A Will In Georgia

It’s a task that many of us put off because of one reason or another.  Maybe you don’t want to talk about it, maybe you think it’s too hard or maybe you are just scared to start the process but when someone dies without a will that person’s “estate” will go through Georgia’s intestacy laws. There have been some very prominent people dying “intestate” lately including the musician, Prince. His massive estate is now in probate in Minnesota, his home state, and a fight is brewing amongst his possible heirs. Very few comprehend what this means or what the laws are in place, but essentially the State of Georgia, through its system of laws, has written a Will for you and you have no control over what’s in it.

What’s Affected

Only property that is solely in the decedent’s name will be handled under the intestacy laws. Certain property is considered to be out of probate. This property normally includes things that are owned jointly with someone else or have a designated beneficiary.

Accounts (401k, IRAs, checking and savings, pensions, etc.) that have a POD (payable on death) designation or property that is owned in joint jointly with someone else, go to the surviving owner following the death of the other owner.

Retirement accounts, IRAs or life insurance proceeds, where a beneficiary is named, are also considered out-of-probate and will go directly to the beneficiary and not through the probate court.

Intestate Succession

The most significant problem that arises when it comes to handling an estate through the laws of intestacy involves who receives what from the deceased’s estate. A large part of who gets what depends on whether the deceased passed leaving a surviving spouse, children or parents.

If you were Married with children:

If you leave a surviving spouse and children, your spouse and your children will have to share your property. In Georgia, the spouse’s portion of the estate can’t be less than 1/3 of your estate.

Married with no children:

If you have died and did not have any children your surviving spouse will receive the entirety of your estate.

Not married but you have children:

If you aren’t married at the time of your death but you have surviving children your children receive equal portions of your estate.

No spouse, No children but surviving parents:

In you aren’t married and don’t have living descendants, but one or both of your parents are still alive, the property goes to your parents.

No spouse, No descendants, No living parents:

If you die with no spouse or living descendants and your parents have predeceased you but DO have living siblings, your brothers and sisters will inherit your estate.

How Is The Amount of The Surviving Spouse’s Share Determined

Georgia’s intestacy laws are formulated to make sure that any spouse you leave behind is taken care of in the event that you die leaving children or grandchildren.

The law makes it clear that, even if you die leaving a significant number of descendants, your surviving husband or wife’s share of your estate can’t be less than 1/3 of the total value of the assets. Whatever is left over is split equally among the children and/or grandchildren.

What Will The Size of The Children/Grandchildren’s Share be?

How much of your estate that your kids will get depends on how many kids you have. All legally recognized children of yours will receive a portion of your estate. Legally recognized children are children born naturally to you and your spouse or adopted by you or your spouse The law does not include step-children.

If one of your children died before you but did leave grandchildren that child’s share is divided equally among their children.

Will the State Get My Property:

While it is extremely unlikely, situations where someone dies with no family do occur on extremely rare occasions.

The law is set up so that in the event that you die without a will and you have no immediate family, your extended family will receive your property.  Your extended family would be cousins, aunts and uncles, and others on down the line. The laws exists for the purpose of ensuring that anyone who is related to the deceased receives the property. If absolutely no relative is available, then, and only then, will the state receive the property.

Avoiding costly battles:

Dying intestate happens frequently. It even happens to the most famous and wealthy among us.  Developing even a simple will is something that most people don’t want to think about but it can make the grief and stress of losing a loved one much more bearable.  If your family knows your wishes it can alleviate the stress of making decisions at one of life’s most trying times. Having a will can also help avoid costly legal battles to determine who gets what.  It also allows you to have a sense of peace knowing that your property will be divided up as YOU want it to and only those people that YOU approve will get your stuff. If you want to get the ball rolling on preparing a will give the compassionate and understand attorneys at Harmon and Gorove a call today.  We will meet with you and discuss your options and we offer cost effective estate planning options.  Let us help you have peace of mind.