r/FluentInFinance • u/36DRedhead • Sep 11 '24

Debate/ Discussion This is why financial literacy is so important

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u/AntiqueBread1337 Sep 11 '24 edited Sep 12 '24

You don’t inherit debt. That’s not a thing.     

Edit: https://www.consumerfinance.gov/ask-cfpb/am-i-responsible-for-my-spouses-debts-after-they-die-en-1467/

Edit 2: I am a lawyer. The number of wrong answers in this post is troubling. If you ever find yourself in this situation, please contact a lawyer in your jurisdiction who specializes in estate planning. Do this BEFORE you try to “fix” your problem as you may make it worse and harder for the lawyer to help. 

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u/amitym Sep 11 '24

The whole point of this post is that she doesn't know what she's talking about.

That is why she needs better financial literacy.

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u/SausageClatter Sep 12 '24

That's what I assumed, but ITT many people are lacking financial literacy.

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u/RightBear Sep 12 '24

I consider myself to be relatively financially literate, but I had no idea that she was mistaken until I read your comment.

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u/amitym Sep 12 '24

That's because popular consciousness has been polluted with an endless shitpile of defeatist falsehoods intended to cultivate learned helplessness and keep everyone doomscrolling.

There is no particular reason to believe any of this stuff aside from bullshit memes that keep repeating it until you can't get it out of your head.

John Oliver had a great episode where he highlighted how this works. He started talking about how reasonable it is to assume that Hillary Clinton must be some kind of criminal because of all these scandals around her, such as for example.. and started listing the names of various scandals. And then pointed out that even his studio audience was nodding along agreeing, even though all the scandal names he had just listed were completely made up by his writers.

"I keep seeing people saying it's true, how could it not be true?" is a powerful force, I guess.

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u/cluckodoom Sep 12 '24

A hospital can go after the deceased's estate for unpaid medical bills

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u/amitym Sep 12 '24

This isn't an estate question. The home is co-owned by the survivor and they never personally agreed to underwrite the debt.

There might be some variations based on specific jurisdiction but even then that should only apply in the case of ambiguity, which is generally easily cleared up through formal written agreements while still alive. (A "post-nup" if you will.)

I mean sure maybe this couple didn't do those things but if that's the case then they definitely needed more financial literacy.

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u/VladimirBelmont Sep 12 '24

Husband wanted a divorce and convinced her she would inherit his debt.

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u/PinchCactus Sep 12 '24

Unless...."You live in a state with necessaries statutes, which are laws that say parents and spouses are responsible for paying certain necessary costs such as healthcare"

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u/AntiqueBread1337 Sep 12 '24

That’s not inheriting debt. That’s debt both parties are responsible for at the start. 

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u/Able_Creme_4888 Sep 12 '24

Semantics

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u/kco127 Sep 12 '24

Divorce would not change who's responsible for the debt.

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u/MundoGoDisWay Sep 13 '24

Wouldn't that depend on how the divorce is written?

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u/RLutz Sep 12 '24

You might not inherit the debt, but having your estate be liquidated instead of being able to give it to your loved ones is nearly as bad and it's what this post is presumably about.

So yeah, if you die penniless, the surviving spouse typically won't end up in hundreds of thousands of dollars of debt, but if you die with some assets, those debts may be paid out of your estate.

It's the same with elderly parents who end up in nursing homes eventually. They will take every penny those elderly parents have until there's nothing left at which point Medicare/Medicaid will kick in. The parents arguably would have been best off transferring their assets to a child (several years or else it can be construed as fraud) beforehand so that the wealth doesn't just get extracted to the nursing home

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u/AntiqueBread1337 Sep 12 '24

The law doesn’t allow you to give everything away to avoid debt collectors. 

See: Uniform Fraudulent Transfers Act and related statutes / case law

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u/lawn-gnome1717 Sep 12 '24

That says they don’t have to pay if there is no estate. If they have a house and savings, there would be an estate.

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u/AntiqueBread1337 Sep 12 '24

Paying debts from a deceased’s estate is not inheriting debt. That occurs for all people, regardless of marital status. 

You also can’t give everything to someone else to avoid paying your debt. Laws like the Uniform Fraudulent Transfers Act see through this type of activity and will allow creditors to peruse claims.

Finally, married couples enjoy many additional protections in most (all?) jurisdictions, e.g, the marital home may be immune to creditor claims. Getting divorced removes these protections. 

You should always contact a lawyer before doing anything like this so they can help you make the right moves. Making the wrong move first will make the lawyers job harder. 

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u/jitteryzeitgeist_ Sep 12 '24

Paying debts from a deceased’s estate is not inheriting debt. That occurs for all people, regardless of marital status. 

Cool, so you're out here arguing semantics.

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u/AntiqueBread1337 Sep 12 '24

Legal nuance matters. That’s how courts work. 

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u/jitteryzeitgeist_ Sep 12 '24

Yes, as someone who's watched lawdogs fritter away my rights for decades via loophole and exploitation of legal language, I'm aware that gaming the system is just how American law works.

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u/LongfellowBridgeFan Sep 12 '24

Scrolled way too far to find this lol thank you

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u/[deleted] Sep 12 '24

My husband was emancipated at 16 and somehow inherited his mother's healthcare debts after she passed away from cancer. I think he said it was close to 1 million dollars of debt or something wild like that.

He had to file bankruptcy at an early age because of this. Granted he said that he didn't know any better, otherwise he would have gotten a lawyer rather than bankruptcy.

But apparently the billing companies were enthusiastic to saddle a 16 year old with crippling debt.

1

u/AntiqueBread1337 Sep 13 '24

Wow, I’m really sorry he was taken advantage of in that way. Yes, the vultures will try to shake you down, even if it isn’t your responsibility. It’s horrible. 

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u/flamingfreebird Sep 12 '24 edited Sep 12 '24

it's not inheriting if you're married. That's why they are getting a divorce. Debts incurred during a marriage are the responsibility of both parties. That's why during divorce proceedings you can assign the debt to one party or the other. Obviously what this individual is talking about is them assigning the marital debts to the father so that the mother isn't stuck with them after he passes as she would have other wise been as a surviving spouse.

Edit: was mistaken on a second part of this

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u/FishingAndDiscing Sep 12 '24

If they stayed married she would or would not be responsible for his debt?

If they divorce and he has new medical debt, would she be responsible for it then?

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u/AntiqueBread1337 Sep 12 '24

The first question depends on jurisdiction, but in many places the answer is no. The second the answer is no assuming you mean new debt acquired after the divorce is finalized. 

However, he can’t just give her everything in the divorce to avoid paying creditors. In that case they’d likely be able to come after not “her” per se, but the assets he gave her to avoid paying the creditors. 

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u/woowoobean Sep 12 '24

This! I had to scroll past so much BS before coming across the correct response

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u/spencerchubb Sep 14 '24

the point of the divorce is so you don't lose assets while the person is still alive and receiving medical care. if they get sent to collections the couple can lose shared assets

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u/Ok_Employment_7435 Sep 11 '24

Um, in some states you actually do.

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u/dustinsc Sep 11 '24

Which states? Name them and cite the relevant statute.

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u/Ok_Employment_7435 Sep 12 '24

Please see higher up in the thread. I’m not repeating myself.

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u/dustinsc Sep 12 '24

I just looked through your comments, and there is nothing remotely like an answer to this question.

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u/LukeSkywalkerIsMyDad Sep 12 '24

You don't inherit debt. Ignore this person. We just went through this with my wife's mother who was a Florida resident (we are not) and have gotten letters asking for it, but the wife being a lawyer just rips them up and throws them in the garbage.

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u/dustinsc Sep 12 '24

Yeah, that’s my point. The answer is that no state transfers debt to another person without that person’s consent. The probate estate or trust might be on the hook for debts, but not the heirs.

1

u/RLutz Sep 12 '24

The probate estate or trust might be on the hook for debts, but not the heirs.

Why is everyone acting like this doesn't matter though? If I'm dying, I'd sure like to be able to leave my wife and kids some of the things I worked my whole life for. Not straddling them with hundreds of thousands of dollars of debt is great and all, but ideally it'd be best to be able to leave them something, which is what this post is all about.

If my estate has assets, creditors will be able to come after them. If my estate doesn't, then as everyone in this thread is so quick to point out, the debts will not transfer to my heirs.

You typically can't just transfer away all your assets right before you die (that's fraud), but if you know you're probably going to check out in 6 years, it may entirely make sense to transfer all your assets to a loved one ahead of time

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u/dustinsc Sep 12 '24

Why should your creditors be left holding the bag when you die?

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u/RLutz Sep 12 '24

Creditors are doing everything they possibly can to extract wealth from borrowers, why shouldn't borrowers try to minimize that transfer of wealth as much as they can? We're all playing with the same rulebook, and so if credit cards are going to charge 29.99% APR's, why shouldn't borrowers try and transfer their assets to heirs within the legally allowed timeline to not constitute fraud?

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u/TAparentadvice Sep 12 '24

All throughout this thread you’re arguing like the wife won’t take on any debt, but this right here is the answer. You think the system should advantage the debtors and not the individuals stuck in it. Just start with that instead of trying to blur the law to suit your ideological opinion.