Death and Debt
My parents each created a trust for their estate. Their purpose was to shelter assets from taxes. I'm pretty sure they had no idea that trusts perform another very helpful function for the trust beneficiary, in this case, me. Unlike a will that goes through probate, where creditors can claim payments from the court, a trust does not go through probate and creditors, if they want to be paid, have a six month window in which to file a claim with the court. At least, that's how it works in DC. I would not have known this except that I have a good lawyer who has instructed me on how to correctly and legally handle my parents' creditors — well, that would be my dad's creditors as my mom didn't have any debt.
I should've taken over my dad's finances six months or a year before he passed away. But right up until two weeks before he died he was mentally himself, totally lucid, and capable of doing things. What I didn't know was that he'd stopped paying his bills about three months before he died. After he died and I started answering his phone I realized he owed a fair bit of money. My lawyer instructed me to give a standard response: "I won't be dealing with his bills until after I've filed his estate tax returns, and that will be in April 2015." Most creditors did not like this response. After I'd had a couple of tussles with banks my lawyer explained further, about the six month window, and informed me that creditors almost never file with the court in DC. So my strategy became one of waiting the creditors out. The six month window is now closed, nobody has filed, and whether I pay any creditors is entirely up to me. My own credit rating, I hasten to add, remains completely unaffected. So to my dad's creditors I say, "go jump in a lake"!
The banks, particularly, were on me like ticks. It's bad enough to have both parents pass away in one year but then on top of that to have banks sending you letters virtually every day, and telephoning all the time, often more than once a day, is really too much. My dad left about $40-50,000 in unpaid bills. The only one I've paid is a home equity line of credit, about $5,000, which clears the title for me on my parents' house. The rest were unsecured credit to banks, and medical bills that weren't covered by insurance.
The moral of the story is if you have any kind of estate it's probably a good idea to have a trust, and at a minimum a good lawyer. Moreover, if you know you're going to die and you want to screw with the system you can also then stop paying bills (or for that matter, run up new bills) which will probably never have to be paid. Is this a great country, or what?? But, for God's Sake, don't try this sort of thing if you're lawyer-less and if you're poor...