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: Mon Oct 06, 2008 02:13 pm Post Subject:
Here is a scenario:
Single mom with a 9 year old child. There is a 100K life insurance policy on the mom - beneficiary is the mom's siter. Mom's sister is also (through paperwork) assigned as the 9 year old's guardian should mom pass away.
Mom also has a mortgage and some CC bills. Sister has her own house. If mom dies, should sister pay off the mortgage of the house and the CC bills - taking money away from the 9 year old that she is now the guardian of? Or should sister pay off the house and the CC bills leaving her about 15K to raise the 9 year old with?
Posted: Mon Oct 06, 2008 03:46 pm Post Subject:
Ins, If he didn't want to contribute things equally in the beginning (splitting the bills) why should she pay his debt. To me he was a dead beat in the beginning by not being one household,two incomes.
Life....The sister would also have any social security benefits that can help to raise the child. I am undecided on this one...I would pay if it was a home passed down through the family but then again she is already raising the child...can she afford the taxes and the upkeep on her sisters house? Maybe if she rented it But then what condition would it be in as it passed from renter to renter when the child reached 18?
Then there is the fact of the homes value. If the child can go get another home for that money when they turned 18 and it wasn't such a big deal to the child then I would let it go.
What are the childs feeling in all this? Todays 9 year olds aren't as dunb as some think...they could at least give an opinion.
Posted: Tue Oct 07, 2008 12:02 am Post Subject:
While it's true we cannot escape death or taxes in this life it should be somewhat comforting to know we can escape unsecured credit card debt.
The "right" thing to do when a spouse dies is to first protect your own financial interests.
Bankers and credit card companies use human nature to their advantage by burying you in debt and creating an indentured servant.
Nothing prevents them from refusing to offer credit without a co-borrower or without collateral.
Don't feel sorry for them.
They ARE part of the problem.
Posted: Tue Oct 07, 2008 12:21 am Post Subject:
Yes they really are and I agree with you 100%. Even when a person gets behind on their payments they don't help by working with you (been there). They may give you a months break but after that either make the payments (in full) or deal with late payments and other fees.
To top it all off they will actually sell your debt for pennies on the dollar whether than have made a deal to help the actual customer out.
They don't feel bad when we have bad things happen and hey they make a lot of money with their outrageous interest and fees soooo I would go on vacation. lol
Posted: Tue Oct 07, 2008 12:24 am Post Subject:
Fireyone - She is a client. We had that conversation. She doesn't care about the house - sister doesn't want it, no potential of rental, etc.
She asked me what the downside was if "they" just let it go. I told her that the only advantage of keeping it would be rental income. However, no one is interested in that option so I said there really isn't a downside.
Posted: Tue Oct 07, 2008 12:29 am Post Subject:
I am glad that you taken care of it for her...you sound like a good person. I agree with your client when not being interested in renting. It really is a nightmare. I had a family member go through this renting thing when she couldn't get her house to sell and was making two mortgage payments.
Not an easy job...especially if you get a bad renter.
Posted: Tue Oct 07, 2008 12:34 am Post Subject:
I have many clients who own rentals (some upwards of 10). Horror stories galore - homes trashed, everything stolen, can't evict them without 30 days notice, etc.
One guy had a family move out and leave his water running in the upstairs bathroom. He didn't know they moved out until 40 days later (rent was paid on the first, they moved out on the 2nd - why they paid rent then moved out I have no idea - no rent came in the first of the next month - waited 10 days for late fee - then the landlord went to the house). The water company verified the water had been running for nearly 40 days.
If you ask me, it simply isn't worth the hassle.
Posted: Tue Oct 07, 2008 12:39 am Post Subject:
cAN'T HE HAVE DONE SOMETHING LEGALLY..LIKE PRESS CHARGES OR SOMETHING. i AM ALWAYS AMAZED TO HEAR THINGS LIKE THIS AND I REALLY DON'T KNOW WHY I AM BECAUSE SO MANY PEOPLE OUT THERE HAVE SUCH UNENDEARING QUALITUES.
When the people moved out of my sisters they were upset cause she sold the house (it was a month to month lease) so they threw tomatos on the walls...floors...ceilings and even down the register vents.
I would have had them prosecuted but she said she was just glad the house was sold and the renting was over with.
Posted: Tue Oct 07, 2008 12:43 am Post Subject:
He could have..if he knew where they went. Problem was they had a 40 day head start. And to be honest, even if they had stayed in town, it is a low profile crime - the local PD has more to worried about than something like this.
Their words.
Posted: Tue Oct 07, 2008 12:45 am Post Subject:
Thats a shame. A crime is a crime but like you said they had a 40 day head start. I can only imagine the damages.
Did they have anything to cover this or did some/ all have to be at their expense?
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