Fred Falater <ffalater[at]yahoo.com> wrote:

- quote -

You didn't ask a tax question, but:

In most states, proceeds of life insurance policies are NOT
subject to the claims of creditors.

And, as a general rule, children are NOT responsible for the
debts of their parents (unless the children signed a
contract, or received non-exempt assets in what could be a
fraudulent transfer).

So it is entirely possible that you and your sisters can
keep the insurance proceeds, and have no liability for any
of the debt.

However, you should consult a lawyer who is familiar with
the relevant laws of your state to make sure that you do
things right.

*Dan Evans
*Author of the Tax Protester FAQ
*http://evans-legal.com/dan/tpfaq.html

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Fred Falater <ffalater[at]yahoo.com> wrote in

- quote -

Sory for your loss.

- quote -

Sounds like your dad was a real estate planner - an unusual
trait for doctors. <G> BTW - I'm married to one so I can
besmirch their investment/estate planning acumen<G> .

The "best" estate plan is to die after spending your last
dime. He came close.

There is a procedure in OH to clear up insolvent estates.
That's what you have. You and your sisters are not liable for
his debts unless you signed on with him. Check with an
attorney who specializes in probate law to get this done. This
will notify the IRS. Don't know if they will come after the
family for the insurance proceeds but this gives them notice
and gets the procedure under way.

In OH creditor claims are paid pro rata according to a
statutory schedule after administrative expenses and the
funeral bill. You may be able to get a fee as administrator
and the lawyers fees will probably come out before the rest
of the creditors get paid. I wouldn't delay. Get it done and
you shouldn't have to think about it anymore.

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Fred Falater <ffalater[at]yahoo.com> wrote:

- quote -

My condolences on your loss. Are you saying he sold his
interest in the nursing home, receiving lifelong care as
part of the sale? If so, this "asset" espired when he did,
and is no longer of concern to his estate/

- quote -

While the SS benefits ceased upon death, do the annuity
payments also cease? Or is there a survivorship clause for
the beneficiaries?

- quote -

This is a key factor for your question. Did he actually make
the benficiary OWNER of the life insurance policy? If true,
the policy benefits are not part of his taxable estate (over
$2,000,000), but MAY BE taxable to the beneficiaries. Who
paid the premiums on these policies for the 20+ years they
have been in existence? If he actually was the owner of the
policies at the time of his death, then the proceeds are
part of his estate for determination of estate taxes, and a
portion may have to be used to pay such taxes before
distribution to the named beneficiary.

- quote -

Sounds like he spent a lot of time getting his affairs in
order, to make his passing as easy as possible. Bon Appetit!

- quote -

Well, for sure, the IRS has dibs on the bank account. If
there are other assets in the gross account, the remaining
92,000 or so of debt will be paid from those. How does one
accumulate $84,000 of CC debt without collectors hanging
around all the time?

If the insurance policies are ruled to be part of the gross
estate, then the debts will be paid from those proceeds,
meaning about $10,000 less (of $250,000) for each
beneficiary. Why should that be a major worry for you and
your sisters? Greed, perhaps?

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"Fred Falater" <ffalater[at]yahoo.com> wrote:

- quote -

This is a matter you should take up with a local attorney
versed in estate matters.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062

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Fred Falater wrote:

- quote -

What happened to his part ownership of the nursing home when
he died?

- quote -

First of all, if his kids are splitting $2,000,000 in live
insurance proceeds, they can certainly afford to ask a
lawyer to look into this issue.

I haven't had the occasion to look into whether a life
insurance beneficiary is liable for debts of an insulvent
estate. My guess is that they will not be.

But what about his interest in the nursing home? That's
worth something, so why doesn't it go to pay his debts?

Stu

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Fred Falater wrote:

- quote -

I count his assets as part ownership in the nursing, the
cash in the bank, and the annuity checks which had to be
pretty large for him to be making payments on $84K in
credit card debt. You need an estate attorney to handle
this <period> .

If you were made both owner and beneficiary at the time
of your birth, then these were gifts to you made without
comtemplation of immediate death. That mean it is yours
outside of the estate and it is tax free to you.

Dick

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My father died at 93 in February. He was a medical doctor.
He had been living in a nursing home for the last 22
years. He had been a part-owner of the nursing home so he
he was living as sort of a life estate.

He was receiving a social security check each month and
a check from an annuity he had purchased by liquidating
all of his other assets. When each of his children were
born he took out a 20 year pay life insurance policy on
his life for $250,000 with the child as the owner and
beneficiary. None of his eight children knew of this
until after his death.

He had even prepaid for his funeral, the church
ceremony, and the lunch afterwards!!

Here's the problem. He had $16,400 in the bank, over
$84,0000 in credit card debt, and over $24,000 in back
taxes. My sisters are worried that we are liable for
some of this debt.

Fred

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