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00:04 Speaker 1: Welcome to Aging Insight with your hosts John Ross and Lisa Shoalmire. This program is brought to you by...

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00:40 John: Welcome to another edition of Aging Insight Television. Well, here we are. I'm your host, John Ross, here with Lisa Shoalmire, and we're elder law attorneys here in the Ark-La-Tex. And what we do is we try to address the issues that people are concerned about when they get older, if they have disabilities, issues like avoiding becoming a burden on their friends and family, avoiding nursing home care, and avoiding going broke trying to accomplish those first two goals. We know that you can accomplish those sort of things but we also know that there's so much to all of this, that if you're going to be successful in this journey, you've got to have knowledge. Now, we can't make you experts in everything but hopefully what we can do is arm you with enough knowledge that maybe you can see issues coming before they become big problems.

01:40 John: Now, we talk about avoiding going broke and one of the things we talk about a lot is, it does get more and more expensive as you get older, especially if you start having long-term care needs. And a lot of times, maybe it's because of a home, maybe it's for some other reason, but sometimes those debts start accumulating. Maybe they're medical bills, maybe they're a house that you took a second mortgage out on, but those bills are out there. Well, a couple of things. One, I will say that from a taking care of yourself standpoint, the fewer bills you have in your later years, the better. In fact, there's a direct correlation between a person's debt and their likelihood to end up in a nursing home. So, if one of your goals is avoiding nursing home care, one of the ways to do that, seems to be anyway, to try to live as frugally as you can and get those debts paid off. But, doesn't always happen.

02:52 Lisa: No, it doesn't. And so, sometimes we lose a spouse or can even be a former spouse, but we lose someone and there are debts that are still owed. And maybe those debts were incurred by the deceased person through medical bills and costs, or maybe those debts were incurred by that person. The death was unexpected and you were just going about your life as usual and throwing the credit card down and purchasing items from time to time. And maybe that deceased had been carrying a balance on a credit card, so that's another thing that we see. But one of the first questions that is usually put to me in that circumstance is, "What is the survivor's responsibility for the debts of the now deceased?" And that's a big question in people's minds.

03:52 John: Yeah, and often times, it's gonna depend on whether or not, are we talking to the surviving spouse or are we talking to the children? But let's start off with the general rule. And the general rule is, is that your debts belong to you, and to you alone. And when you die, debts don't generally pass to the people you leave behind. They're your debts and there's actually a term out there, it's called "filial responsibility." And this fancy term, all that means is it's where a survivor would be responsible for the debts of somebody who has passed away. And most states, and certainly our viewing area of Texas and Arkansas, filial laws don't exist. The spouses and children are not necessarily responsible for those debts, but that's the general rule.

04:57 Lisa: Yes, that is the general rule. And of course, one of the exceptions that exist to that general rule is whether or not the debt is considered a community debt or a separate debt. And this goes back to our laws about community property and separate property. And of course, the state of Texas is a community property state. So often times, even if your spouse who is now deceased, was the one who applied for the credit card, used the credit card, you never bought a thing on the credit card, if that credit card account is a joint account that was opened during the marriage, then the surviving spouse may, in fact, have the responsibility to pay off that balance. So that can become a real issue. Now, if you're just an authorized user on a credit card then that situation, it's not a joint account. You are simply an authorized card-carrying user, and you would not have responsibility. So, you have to go back and remember, how was that account opened? Is it a joint account that was opened during the marriage, or is the spouse that's surviving just an authorized user? 

06:23 John: Right, and the way to think about it is, is it your debt? If you were still alive, would you personally have had to pay it off, or would it have affected your credit score, and things like that? A lot of times, it may not necessarily be all that clear but you may not remember that you signed something that made you a co-owner or co-responsible, or that they used your credit score to get that credit card or whatever it is. So, the first thing to figure out, especially in a husband-wife situation, is whether that debt is gonna qualify as some sort of community debt, or if it's going to be the separate debt of that deceased person.

07:07 Lisa: Well, and you know John, you're talking about the first thing to do is to figure that issue out but those things take time.

07:15 John: It does.

07:16 Lisa: And so, the first thing to do, I guess, is put the brakes on, and take a breath, and let's figure out what bills are coming in. So often, I have surviving spouses who did not handle the bills, did not deal with the household expenses, and they just don't have the first clue as to what to do. So, the first thing, let's take a breath, don't panic, and then let's start looking at those statements as they come in to start answering these questions.

07:49 John: That's absolutely right. And while you're taking a breath on that, we're gonna take a quick break and then we'll come back, and we're going to talk about the other issues related to paying those debts, and who pays, and what amounts get paid, and all of that. So stick around.

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10:19 Lisa: Welcome back to Aging Insight. I'm Lisa Shoalmire and I'm here with John Ross, and you're watching the best program in the Ark-La-Tex to get information about aging and retirement, and dealing with some of the issues that we deal with through disability, and death, and retirement. So today's program, we're talking about dealing with debts that are left behind when someone dies, and whose responsibility it is to pay for those debts, and just how those things are addressed. So, in our first segment we talked about that generally, the debts of a deceased, they generally go away. They're not the debts of the living persons that are left behind. However, one issue that comes up quite a bit is, if the debt, is debt securing the purchase of an item, such as a home or a vehicle, well that debt gets a little bit of a different treatment.

11:35 John: Yeah. Oftentimes, I'll get the question maybe from some kids that are in the office, and they'll say, "Well, Mom died and she had a house, and we're her three kids and we're her heirs, and so the house is gonna come to us, but it's got a mortgage on it". And so their question is, "Well, are we be responsible for the mortgage?" Well, no. Again, kinda like we talked about earlier, the kids are not responsible for the debt. However, a mortgage is a type of secured debt. Secured debt means that the lender, which in this case is probably a bank, they have a lien against that item, which in this case is a house. And if that debt doesn't get paid, then they take the house or the same thing applies when you have a car note. The same thing even applies if you go to one of those personal property rental companies and get you one of those big screen TVs for $16 a week. Don't do that. But if you do, that's one of those things where they have a security interest in that property. So, it's not that the debt passes to the heirs. That doesn't happen, but the debt is attached to that asset and before that asset can pass down, that debts gonna have to be paid.

13:03 Lisa: Right. So, we get into a situation a lot of times where those children say, "Hey, Mom left us the house, there's a mortgage on it," but they don't get... You can't have your cake and eat it too. So, you don't get the house and the debt wiped clean. That doesn't happen. So, a lot of times the heirs look at it as, "Well, can we continue to service the debt? Can we pay on the debt so that we can keep the house?" And that is a possibility but that is something that will have to be negotiated with the lender because the lender is gonna want to make sure that these heirs have credit worthiness and will pay the debt. But, now we're talking about basically those heirs taking personal responsibility for the mortgage left on Mom's house. But that is a whole new transaction.

14:00 John: Right. Generally, when you're talking about debts, they can fall into one of two categories. Secured debts, things like a car note, a mortgage, and unsecured debts. Unsecured debts are where, really, it's just a promise to pay. And this is your credit cards, little small loans at the bank and things like that where you owe the money but it's not attached to any particular asset. Another good example of an unsecured debt could be unpaid medical bills. We see that one quite often. Now, again. These debts do not pass to the heirs. But, paying these things off, that can be a little tricky. Because sometimes, maybe there's more debts than there are assets to pay.

14:57 Lisa: Well, and that's what it gets down to is, while these survivors themselves do not have personal responsibility to pay these debts. The debts do continue and the deceased person's estate or assets the deceased person left behind do carry the burden of those debts. And so if the deceased person left behind a home, a house full of furniture, some money in the bank, then before those things pass to the heirs, there's a process that we go through and part of the probate process where creditors are given an opportunity to present their claims and it may be that assets of the deceased person's estate are going to have to be liquidated or used to pay off those debts. So, the survivors don't get personal responsibility for the debts but the assets of the deceased under the law can and generally are used to satisfy and settle those debts.

16:09 John: Yeah. And a lot of times the way this works is very similar to a bankruptcy, where the death of that person acts kind of like a bankruptcy. The secured debts, well, those assets are tied up. But the unsecured debts, the credit cards, the medical bills, there's a process that you have to go through. And the start of that process is notifying all of those creditors. And if you've ever looked at a newspaper you might have seen that little notice in the back pages that says, "The estate of so-and-so. And if anybody has a claim against this estate, then they need to file it with the clerk's office." Well, that's step one. Step two is, if those creditors wanna get paid, they have to file a claim. And if they don't file a claim, in many cases, then that debt goes away, just like it would in a bankruptcy. And even if they do file a claim, that is not necessarily the end of the story.

17:13 John: There's lots of steps and lots of rules to all of this. And in fact, a lot of times people will come to me Lisa and they'll say, "Well, I've already paid this bill and that bill but now we've gotten a couple more coming in." If you're really following the rules, you shouldn't be paying any of those debts until those folks have filed creditor claims. And you potentially could get in trouble for paying debts that are not legitimately due. Think of it this way, if I died and I had left everything to my three kids, and I had Lisa who was in charge of my estate, and Lisa just starts paying bills without publishing notice and seeing if those folks would even file a claim against my estate. My kids might be unhappy and they might say, "Hey look, that money should've gone to us because those creditors never actually filed a claim." So, a lot of times there's kinda that urge...

18:17 Lisa: To take care of business.

18:18 John: To take care of business. But kinda like Lisa said, slow down. There's a process, there's a process that you have to do but there's also a process that those creditors have to do. So, stick with us. We're gonna talk about a couple other places where it can get a little touchy about who's liable for what. So stick around.

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20:19 Lisa: Welcome back to Aging Insight. I'm Lisa Shoalmire here with my co-host John Ross and today we're talking about one of people's least favorite subjects, and that is to do with debts and paying off debts. Particularly in the situation where the person who has incurred those debts is now deceased. And we talked about that the personal liability to pay for those debts generally does not flow down to the survivors. And that generally the estate or the property left behind by the deceased is the property that can be used to satisfy those debts of the deceased. But that there is a process, a step-by-step process to go through to make sure that we're only paying legitimate debts and we're not jumping the gun and paying any bill that comes in. But John, one of the biggest debts people usually have at the end of their life has to do with medical bills and cost for care in their final weeks and months.

21:31 John: Absolutely, and anybody who's ever gone through this process, well whether you're talking about admitting that family member into the hospital, whether you're talking about admitting them into a nursing home, the first thing you get when you walk in there is this stack of paper. And there's medical treatment forms and there's patient bills of rights, and HIPAA releases and all kinds of information. And, in fact, it's not uncommon for nursing home admission packets, for example, to be well over 100 pages long. And contained in all of that, is all kinds of different information but often times there's one part in there, one little piece, and it'll be something about financial responsibility. And essentially this is a part of that admission packet that says, "Okay, who's gonna be responsible for this bill if it doesn't get paid?" And, this is where you can make some mistakes.

22:42 Lisa: Right. So a lot of times as you're going through signing that stack of papers to admit that family member to a long-term care facility or a memory care center, we come across that packet that says financial responsibility. And this is where, it's a form presented to you that says, "If the patient and the patient's assets are insufficient to cover the cost of care, then who is going to be responsible for the bill?" And generally, the facility is looking to the person who's sitting across the desk from them and signing these documents on behalf of the patient. And it could just be a form that's presented as if it's a regular course of business-type form but yet, signing that agreement in your personal name on behalf of a family member or spouse that's going into that facility can put you personally on the hook for any unpaid bills about that patient's care.

23:54 John: Right, now first thing to know about this, it is illegal for a facility or hospital setting to require third-party guarantee of payment from a family member. That nursing home, they may say, "Well, here, we want you to sign this and become financially responsible for Mom, or Dad, or whoever." But they cannot require that as a condition of admission. They may make it sound like it's mandatory. It's not, it's voluntary. The other things is, is oftentimes they do have to have something signed that says who's responsible. Well, the person who's responsible for that bill is the patient. Now, the patient may have Alzheimer's, they may have Parkinson's, they have had a stroke, they may not be in any position to enter into contracts and sign. Oftentimes, that's where that family member is conducting business for them, often using a power of attorney.

25:01 Lisa: Right. And so, if you are the agent under that power of attorney and you are the one signing various consents and admissions for treatment and care for that patient, then you wanna make sure that you sign any financial responsibility documents and make it very clear on that document that you were signing as the agent under a power of attorney.

25:29 Lisa: So, for instance, if your mom is named Mary, and you are named Linda, then when you sign that financial responsibility form, you would sign, "Mary Smith by Linda Smith, POA." And that lets everybody know who looks at that financial consent paperwork that you were signing for Mary's obligation to remain her sole obligation, and you're not signing it personally on your own.

26:06 John: That's absolutely right. And this just kinda goes to show that whether you're talking about later life entering into contracts, whether they're nursing home admission agreements, or some sort of mortgage on the house, or things like that, those can have special consequences when it comes to getting older.

26:25 John: And if you've dealt with somebody, maybe you have a family member who's died and you've got debts out there, the key to all of this, is gonna be for you to get some advice that way it's specific to your situation. But a little bit of advice will go a long way towards avoiding some of these big problems.

26:48 Lisa: Well you know, and debts are something that you can really get tripped up by in an estate and so it is really important that you are guided correctly and you go through the correct processes. If you go through the correct processes, then you're going to be fine, and you're not gonna be responsible or liable for any debts. If you don't go through the correct processes, then frankly that's where the danger lies for you personally.

27:20 John: That's right. So, get good advice out there. Be careful as you navigate. And of course, always tune into Aging Insight to get answers to all of these questions. We'll see you next time.

27:29 Lisa: Bye-bye.

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27:31 Speaker 1: Thank you for joining us for this week's Aging Insight program with John Ross and Lisa Shoalmire. This program is made possible by...

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