Son of Friend Died

[NECPA in NEBRASKA]

My friend's son died suddenly and she called me to ask for help. The son has no assets, only debt. There was a life insurance policy with her as the beneficiary. She asked me if she will have to pay the debts. I told her that I'm not an attorney, but that it looks like his federal student loan will be canceled and the debt discharged. She does not know if her filed a 2013 tax return or if he owed anything. She does know that he did not have any filing requirement for 2014. There was no will and she is his only surviving relative. I have no idea if the IRS or debt collectors can come after the life insurance proceeds. He has lived at her address for at over two years and no letters have come from the IRS. I would be grateful for any free advice that I can pass on to her. She is in so much pain, that anything that I can do to help her will be appreciated. Thank you. 

[rfassett]

The son's estate will be responsible for the paying of his debts.  If there are no assets in the estate, then the creditors will not be paid.  That is not to say that they will not try to coerce Mom into paying, but unless she was a co-signor on his debts, she has no obligation to pay them.  The life insurance proceeds, naming her as beneficiary, are not part of his estate.  Life insurance proceeds are only part of the estate if a beneficiary is not designated.

[Catherine]

My sympathies to your friend!  

I concur with rfassett:  the estate has the obligation to pay debts, NOT the family/heirs.  However, they *will* in all likelihood be pressured to do so.  

 

[Max W]

tHIS MIGHT HELP!

http://www.nolo.com/legal-encyclopedia/nebraska-probate-shortcuts-32147.html

[NECPA in NEBRASKA]

Thank you all! She is very grateful! She lost her husband and her only child in the past two years, so I am so glad to be able to ease her mind a little. 

[JohnH]

This is such a sad situation.  I had this exact situation with a family member about 4 years ago.  Their son, who seemed healthy and active, died suddenly at age 26.  The word of his death came as they were traveling to a family get-together.  He was single, with no assets except for a cheap car, and he owed a couple of general creditors plus some taxes because he had been working as an Independent Contractor.  There was a small life insurance policy, which wasn't even enough to cover the funeral costs. 

A creditor somehow found out about the life insurance policy (maybe one of the distraught parents told them about it at some point in an effort to be honest).  The creditor made them miserable for a while, even trying to guilt them into paying by claiming it would spoil the son's reputation & memory to leave an unpaid debt.  Really despicable stuff under the circumstances, IMO. 

There wasn't enough money involved to consult a lawyer, and I wasn't sure of the legal ramifications.  But I told them if I were in their situation I would personally stonewall the creditors and IRS under these circumstances. Every time we would see one another at a family function, they would tell me about the latest contact by IRS or a creditor, repeatedly asking if they might get into personal trouble.  It was such a strained situation; I never ventured to ask about the latest development because it would be for them like reliving the whole episode surrounding his death.  Yet they would feel compelled to bring it up because they needed some reassurance that what they were doing was OK, both legally and morally.

You are definitely helping your friend at a time when there is very little anyone can do to ease her pain.  

Edited September 3, 2015 by JohnH