by GarySpicuzza » Sun Oct 05, 2008 10:55 am
So I'm clicking through the 857 channels last night and I stumble upon Suze Orman.
The caller says she and her husband always kept their money separate and just split the bills. Caller says husband died and had a $250,000 life insurance policy naming her as beneficiary but to her surprise he had racked up about $100,000 in debt in HIS name only. Caller said she knew there was "some" debt but had no idea it was that much.
Caller asks Suze if she should pay off that debt or should she keep the life insurance money for her future financial needs?
Simple question and the simple answer should have been keep the life insurance benefit for yourself.
But Suze wanted to know the amounts of the outstanding loans and their respective interest rates, they were between 7% to 16%.
Then Suze asks her where she could get 7% interest guaranteed and told her to pay off the $100,000 worth of SOMEBODY ELSES DEBT!
That's bad advice.
If the debt is just in your husband or wife's name ALONE that's not your bill to pay. If the creditors were concerned about the repayment of their loan upon death they would have required a collateral assignment on his life insurance policy BEFORE extending credit.
They didn't, the debtor died, they're out the money, too bad. They didn't understand the importance of the beneficiary collateral assignment information in time. Make better business decisions next time.
It's not the morally "right thing" to do to pay off that debt with your life insurance proceeds. That money is for the exclusive benefit of the person named as the beneficiary in the life insurance policy. (Florida)
Don't think for one moment the "risk" of the debtor dying isn't built into the interest rate charged on unsecured debt.
It is.
Suze's advice was geared towards not hissing off bankers and credit card companies. The caller would be a fool to unload $100,000 in the absence of a legally enforceable obligation.
Natural person named beneficiaries should keep their money.
The caller is a very smart woman for NOT comingling her money and his money and his debt with her debt.
As Tina Turner would say:
What's Love Got To Do With It?
The caller says she and her husband always kept their money separate and just split the bills. Caller says husband died and had a $250,000 life insurance policy naming her as beneficiary but to her surprise he had racked up about $100,000 in debt in HIS name only. Caller said she knew there was "some" debt but had no idea it was that much.
Caller asks Suze if she should pay off that debt or should she keep the life insurance money for her future financial needs?
Simple question and the simple answer should have been keep the life insurance benefit for yourself.
But Suze wanted to know the amounts of the outstanding loans and their respective interest rates, they were between 7% to 16%.
Then Suze asks her where she could get 7% interest guaranteed and told her to pay off the $100,000 worth of SOMEBODY ELSES DEBT!
That's bad advice.
If the debt is just in your husband or wife's name ALONE that's not your bill to pay. If the creditors were concerned about the repayment of their loan upon death they would have required a collateral assignment on his life insurance policy BEFORE extending credit.
They didn't, the debtor died, they're out the money, too bad. They didn't understand the importance of the beneficiary collateral assignment information in time. Make better business decisions next time.
It's not the morally "right thing" to do to pay off that debt with your life insurance proceeds. That money is for the exclusive benefit of the person named as the beneficiary in the life insurance policy. (Florida)
Don't think for one moment the "risk" of the debtor dying isn't built into the interest rate charged on unsecured debt.
It is.
Suze's advice was geared towards not hissing off bankers and credit card companies. The caller would be a fool to unload $100,000 in the absence of a legally enforceable obligation.
Natural person named beneficiaries should keep their money.
The caller is a very smart woman for NOT comingling her money and his money and his debt with her debt.
As Tina Turner would say:
What's Love Got To Do With It?
Posted: Sun Oct 05, 2008 01:15 pm Post Subject:
This is a personal "judgment" call.
Most married couples with whom I have worked didn't do it this way.
I have run into situations where the man or woman owned a home and upon their marriage, the mortgage was in the "one name" only.
So, in this situation, upon the death of the actual home owner, should the mortgage be retired using life insurance proceeds?
Of course, state laws would come into play here and they differ.
It would be very difficult to believe that the widow didn't enjoy some of the benefits of the $100,000 personal debt of her deceased husband.
She could probably negotiate a pay off amount much lower than the actual debt balance and she probably should do that.
Posted: Sun Oct 05, 2008 01:52 pm Post Subject:
So, in this situation, upon the death of the actual home owner, should the mortgage be retired using life insurance proceeds?
A home mortgage is secured debt. If you don't pay the lender will foreclose on the property.
The caller was talking about UNSECURED debt that she had nothing to do with although she admitted she knew of some debt.
My point is it's foolish for the surviving wife to think or be advised by Suze that she has some sort of moral obligation to pay off her husband's debts with her life insurance benefit.
She did not create the debt....he did.
The unsecured debt is and was his problem, not hers.
If the lenders wanted to protect their interests then they should have required both husband and wife be named as co-borrowers or require a collateral assignment on his life insurance policy.
The lenders have in house lawyers don't they?
They know these risks, shouldn't they?
Let's remove the life insurance from the equation.
In the absence of life insurance should the surviving spouse struggle for the rest of her life to pay off her dead husband's debt that she had nothing to do with and did not create?
Posted: Sun Oct 05, 2008 03:18 pm Post Subject:
It comes down to what is "morally" right and what is legal. Gary is right - there are no legal reason she should pay his debt. I gave my mother in law the same advice when my wife's dad died. CC is in his name, it's his debt. It was difficult for her to finally come around, because of the "moral" issue.
Maze makes a good point also - it would be difficult to believe that she didn't benefit somehow from his debt.
It basically comes down to - what every you do, you have to able to sleep at night.
I can add that two years after my father in law passed away, my mother in law still thanks me for giving her the advice I did. She says that she would have such a difficult time financially if she had paid off his debt.
Posted: Sun Oct 05, 2008 07:45 pm Post Subject:
Sorry Gary I'm with the rest IMO this is a moral issue....The arguement could also be made that she surely is benefitting from the life policy if they paid their own bills, he didn't support her at all their money was mine and yours then she don't need that money! Don't you agent types talking about the financial loss that comes with the death of a loved one, and if there no financial loss then she shouldn't be entitled to the money at all right? I'm being sarcastic of course....
Posted: Sun Oct 05, 2008 08:20 pm Post Subject:
Lori, okay, you say she should pay the debt.
What if there wasn't any life insurance?
Should the wife struggle then to pay the $100,000 debt that she didn't create.
Or are we just talking about selective morality?
I believe the answer should be consistant.
If there wasn't any life insurance I bet Suze would have advised her NOT to pay the bill or seek out the advice of an attorney.
Should the wife also go to jail if the husband kills someone by drunk driving?
It's the same logic.
You either have a legally enforceable obligation or you don't.
The credit card lenders knew or should have known the risk of death and they chose not to protect themselves or they have embedded that risk into their interest rates.
Posted: Mon Oct 06, 2008 12:32 am Post Subject:
Gary I agree with you. My friends mother passed away and she had some debt (it was small but it was debt) and he was advised by his attorney to not pay it. When the debt collectors called he just told them that she passed away. That was that and calls eventually stopped.
Michael
FindYourPolicy.com
Posted: Mon Oct 06, 2008 09:35 am Post Subject:
It's the same logic
No it's not...not even close that is a criminal act..What about your logic that she (in this case) had no financal loss due to the death of her husband...is she still entitled to the money? Gosh I guess rather than being a couple that share everything we should have all our bills split some in his name some in mine and then who ever dies last wins...How is this any different than your rant about people that over mortgage their homes, buy luxury items, then walk away from the note keeping the 'ill gotten gains'' ? Isn't that the same as this? Where do you think all the property that he purchased is going to go? My brother had a ton of credit card debt that he ran up all pretty much within six months prior to his death...he was divorced however so his ex-wife or children were not responsible...I don't know I can't be consistant with this...if my husband passed in the night (heaven forbid)..and he had just purchased new boat seats from say Cabela's on a charge account...no doubt in my mind I'd pay the bill...course it's also not 100k...just feels to me in this particular incident that she has a win fall that would more than cover the debt and leave her in good shape after...It just sticks in my craw that you know she has benefitted and may continue to benefit from whatever he bought with this 100k...I think there should be (in this case) an effort to clear it...
I agree she's not legally liable for the repayment....
Posted: Mon Oct 06, 2008 10:43 am Post Subject:
I'll ask again and restate:
Let's remove life insurance from the equation.
Lori,
What if there wasn't any life insurance should the wife struggle then to payback the $100,000 of debt she didn't create?
This is consistant with my rants about homeowners who have legally robbed the bank. It's the BANKS and the LENDERS who need to make better business decisions.
Human nature remains constant.
I agree she's not legally liable for the repayment....
Then that's what Ms. Suze should have told her caller.
Posted: Mon Oct 06, 2008 01:59 pm Post Subject:
I think tha Suzi should have stuck to informing the caller of the rules and not pushed her morals or how she feels about the subject on the caller. She should have stuck to informing her what her legal right is and let the caller make her own moral decision. Correct me if I'm wrong but I do beleive that a debt claim cannot go after life insurance benefits.
Michael
FindYourPolicy.com
Posted: Mon Oct 06, 2008 02:04 pm Post Subject:
What if there wasn't any life insurance should the wife struggle then to payback the $100,000 of debt she didn't create?
My short answer would be "Yes".
However, this entire conversation was initiated by the fact that there were life insurance proceeds.
We don't know what was on the deceased husband's mind at the time he purchased the life insurance policy and named his wife as the primary beneficiary. But, I guess we can just assume that one of his goals was to retire debt in the event of his premature death (yours, mine or ours).
The ability to obtain a large amount of unsecured debt speaks to a person's character and reputation, I think.
I guess it all boils down to whether or not the widow wants everyone to believe that her deceased husband was a "dead beat".
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