OK, so my mother has passed away and left a bunch of unpaid debt. The largest of which is the home. It was morgaged to the hilt, so she had zero equity in it. She owes 117,000. Next are back property taxes and income taxes which total in the range of 7,000. Then there are medical bills ( heart condition ) a loan for her truck ( which was repo-ed ) and some other expenses. Now the kicker. She had a life insurance policy for 120,000 which she put in her brothers name ( my uncle ) . He was to distribute the money to ME as my mother did not want my wife ( whom she detested ) to get a hold of the money. ( in case of a divorce ) So my question... is that money liable for any of the expenses? We lived in the home with out paying rent for about 3 months before we figured we should move out in case the bank showed up and kicked us out. We live in Michigan and the housing market is suffering so I figure the bank is just waiting for some payment to come in. My uncle advised us to NOT pay the home off with the insurance money and to let it go to the bank via probate . My uncle stripped the home of EVERYTHING from the dishwasher to the front door . He is the executer of the will. His name was on the insurance check, but as I said that money was to go to me for my future. I was willed the home, but it had no value as it was without any equity. So are we labile for any debt ( funeral was paid for ) ?

I sure hope you get an attorney to stop your uncle from running off with the insurance money altogether. This matter will definitely have to go through probate (which takes forever by the way). Who is going to hire the probate attorney, you or your uncle? Does your mother's will mention anything about the insurance money going to you? If it does not state this explicitly in her will you may have yourself quite a pickle of a situation trying to get your uncle to release the money to you. Does it state anywhere on the insurance policy anything about you? Probably not. It's probably just a "my mother told her brother to give me the money when she dies", etc. I don't forsee him just willingly handing it over since he gleefully stripped the home of everything. This is definitely going to prove interesting. Get the phone book out now and start calling a good attorney before your uncle blows through all the insurance money.

Thanks for your response. Of course this is an issue, as she had only a hand written will and HE ( the uncle ) has sole possision of said will. But all the insurance money concerns aside, what does probate do? What will become of all her debt? I have to believe someone is responsible, since there IS insurance money floating about. I have little doubt he will screw me, at least out of half the money. I just do not want it to be spent if I am liable for any debts.

Also, he has advised me to NOT hire a probate att, but instead to ignore the probate altogether and just let them work it out.

I would not agree with uncle as there is real estate involved and back taxes to take care of. But he does have a point... if he pays the back taxes on the property then you are off the hook for the property if, in fact, it was willed to you at all. It's a shame that the house has no equity but it could have been rented out at least for a little while to help defray some of the mortgage costs. Too bad he trashed the home.

I hope the handwritten will was properly witnessed and notarized as it will prove to be a problem if at any time it must be produced to the probate judge. I used to make up wills for clients and notarize them with the proper witnesses present.

A handwritten will is not the best (it can still be legally binding even if handwritten) and if it was not properly witnessed is really useless. I'm beginning to think that uncle is wanting to hide something from you. Have you had the opportunity to actually read her will that she left? The fact he is the executor of her will give him a lot of deciding ability in this matter though if in fact it is a viable instrument.

I used to work for a life insurance agency and just as an afterthought I'd like you to know that any of the life insurance money is considered tax free money. It's only taxed if you make a profit off the money... the profit is taxed.. not the actual life insurance money itself is taxed. So uncle has 120K tax free money right now.

First, the insurance is NOT part of the estate. I don't know why she didn't make you the beneficiary. Now the money belongs to the uncle and he may incur some tax issues just giving it to you. You said the check was made out to him, has he turned it over to you yet?

Second, only mom's estate is responsible for her debts. So your uncle is right about not paying anything. As executor of the will he is responsible for liquidating the estate and paying off any bills.

If he stripped the house and did not use any income from doing so to pay off her debts, HE could be liable. But not you.

I also agree that you should not hire a probate attorney, that's his job if he decides to probate the will. And I disagree that it is necessary to do so.

What you do need is to see a copy of the will and immediately. You should also see a copy of the insurance policy.

But, from what you have told us, you should get a check from your uncle for the insurance policy proceeds. That money is yours to do as you please and does not need to be used against any of mom's debts. The house will be foreclosed on by the lenders. It will be up to them to sue the estate if they feel the house was gutted and a fraud perpetrated.

The only thing that concerns me is that you were willed the house. If you were, then you could be held responsible for the back taxes and the debts on the house. If you let these go to foreclosure it could affect your credit. On the other hand if the title never changes hands, you are off the hook.

not an expert in this area,

This is just my experience... there are others here who will support or correct what I say as needed... I'm sure ill be wrong or not completely correct on something...

My wife recently went through this... I believe the insurance money passed outside of the estate... that is, it was distributed long before the estate was settled and wasn't subject to the debts of the estate. Meaning, if I'm correct, hell get the money. Whether he honors her wishes is up to him.

Also, understand in getting this money he might have some financial issues to deal with... as in it might very well push him into a new tax bracket... this means even if he wants to honor her wishes, its reasonable that he might need to use a substantial sum to cover the financial burden this could have on him... its not as simple as he cashes a check and slips you the cash... my wife had to work like heck with a financial planner just to find a way not to "lose" half her inherited money to higher taxes and, even with her planning, it still almost subjected us to the AMT tax. It can be sickening. However, I know there can be ways to minimize the taxes on this money, and its up to a more knowledgeable person to clarify that. Point is, you may not be able to fairly say "X" dollars to him is "X" dollars to you... not fair to him to incur a bigger financial burden just because things were not planned as well as they could have been (directly to you)... I know ins money isn't taxed outright, but does it count as income against the uncle...

Her debt runs through the estate assets...

When done right all creditors are notified of her passing and they have a certain time to claim payments

I'm my wife's case, her father had some outstanding lines of revolving credit... they were notified... it was amazing how little they tried to collect... just amazing. After a certain window of time... and I don't know how long it is, but its not as short as a few months... his estate took nearly 2.5 years to settle. Some "unique" circumstances too...

Then the assets are run through to satisfy the debts. I'm guessing this means bye bye house if her debt is that high.

If the house is lost and the debts are not paid, you arent liable for the remaining debt... BUT... if the house has been stripped and you were to have had the home, a creditor might cite an attempt to commit fraud... just as a person cannot, just before dying, transfer the house to a beneficiary to avoid legitimate debts being paid. So I don't know how stripping the home does you any good. Maybe hell get away with it, or not.

Remember... the debts are honest and owed.. so if the home is lost in the process, it's a result of the assets being used to satisfy debt that was incurred in good faith. It might be unfortunate, but, again, the debt was undertaken in good faith, or at least should be.

So I think the ins $ is safe, but with him. The house might be lost if there are no other assets in the estate to cover debt, its in the details of the probate. You won't be responsible for outstanding debts if the home doesn't pay off the debt.

It comes down to details... but sounds to me like he's legitimately trying to save the ins cash from the estate debt. If the debt is so big that there's no way to pay it with other assets, and you paid money into the house but still couldn't keep it, essentially the money would be "lost" to pay the debts.

Now ill let others check and balance.

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Originally Posted by ScottGem

First, the insurance is NOT part of the estate. I don't know why she didn't make you the beneficiary. Now the money belongs to the uncle and he may incur some tax issues just giving it to you. You said the check was made out to him, has he turned it over to you yet?

Second, only mom's estate is responsible for her debts. So your uncle is right about not paying anything. As executor of the will he is responsible for liquidating the estate and paying off any bills.

If he stripped the house and did not use any income from doing so to pay off her debts, HE could be liable. But not you.

I also agree that you should not hire a probate attorney, that's his job if he decides to probate the will. And I disagree that it is necessary to do so.

What you do need is to see a copy of the will and immediately. You should also see a copy of the insurance policy.

But, from what you have told us, you should get a check from your uncle for the insurance policy proceeds. That money is yours to do as you please and does not need to be used against any of mom's debts. The house will be foreclosed on by the lenders. It will be up to them to sue the estate if they feel the house was gutted and a fraud perpetrated.

The only thing that concerns me is that you were willed the house. If you were, then you could be held responsible for the back taxes and the debts on the house. If you let these go to foreclosure it could affect your credit. On the other hand if the title never changes hands, you are off the hook.

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If the insurance policy named the Uncle beneficiary there is almost nothing that can be done to allow someone else to receive the proceeds. You would have to show gross undue influence, mental incompetence, actions completely contrary to any previous actions by the owner of the policy. The Uncle COULD collect the proceeds and "gift" them to the poster but that has pretty hefty tax consequences. It would seem that if the original poster collected the proceeds OR the Uncle collected and "gifted" to the person who posted the disliked daughter-in-law would still find out about it. As far as I know, at least in NYS, a Will cannot control the beneficiary of a life insurance policy. A trust can in certain circumstances but that is not the case here.

And, as Scott said, the debts of the deceased are paid to the extent possible by the assets of the estate - NOT from insurance proceeds. Also, the property passes in the financial condition it was at the time of death - with tax liens (which do not simply go away), etc.

Also (again in NYS) only the Executor can begin probate unless there is a hearing to appoint someone else (because the named Executor is failing to do so, incompetent and so forth). I haven't seen a handwritten Will stand up in Court in a very long time so I question the validity of the Will - the estate (as such, not the insurance) might very pass to the heirs under the particular State's laws.

Just a couple of clarifications to kp's response. As twinkie mentioned, the insurance money is not subject to income tax. But since it's the only cash that can be distributed, its not unreasonable for him to take the expenses incurred as executor from that money. However, if he gives you less than the face amount, you should demand an accounting.

It doesn't surprise me how little the creditors tried to go after the estate. Since they have no rights beyond the estate, if they know there is nothing there, why expend time and effort?

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Originally Posted by twinkiedooter

I would not agree with uncle as there is real estate involved and back taxes to take care of. But he does have a point......if he pays the back taxes on the property then you are off the hook for the property if, in fact, it was willed to you at all. It's a shame that the house has no equity but it could have been rented out at least for a little while to help defray some of the mortgage costs. Too bad he trashed the home.

I hope the handwritten will was properly witnessed and notarized as it will prove to be a problem if at any time it must be produced to the probate judge. I used to make up wills for clients and notarize them with the proper witnesses present.

A handwritten will is not the best (it can still be legally binding even if handwritten) and if it was not properly witnessed is really useless. I'm beginning to think that uncle is wanting to hide something from you. Have you had the opportunity to actually read her will that she left? The fact he is the executor of her will give him a lot of deciding ability in this matter though if in fact it is a viable instrument.

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Curious if you are an Attorney (you said you have made up Wills) and what State you are in - Wills are not notarized in NYS so it's a different procedure from what I am familiar with. Also a lot of difficulty with handwritten Wills in NYS - most don't make it through probate.

Just trying to be perfectly clear for my own understanding...

Are you saying that the ins money passed to the uncle is not counted as income on the uncles side? That there's no way it can bump the uncle into a new tax bracket?

You said you saw the check? So why hasn't the uncle endorsed it to you? Like I said, it was a mistake to not make you beneficiary.

As for the handwritten will. It wouldn't stand up if challenged, but I don't see you challenging it. As far as you are concerned mom had nothing to leave you except the proceeds of the insurance and she messed up that. But you appear satisfied with losing the house and everything else as long as you get a hefty part of that $120K.

That being the case, then you don't really want the will probated, or challenged. You just want to get your money ahd have the estate just tell creditors she died with no assets to dispose of.

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Originally Posted by kp2171

just trying to be perfectly clear for my own understanding...

are you saying that the ins money passed to the uncle is not counted as income on the uncles side? that theres no way it can bump the uncle into a new tax bracket?

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Yes, it's nontaxable income.

Judy - never said I was attorney. I was a paralegal and prepared many wills and notarized same. States were Florida and Ohio. There the wills required two witnesses and a notary to be legal. Thank you. In NYS it may be quite a different story not to have wills notarized but just witnessed. I can't imagine why they would not be! Anybody can make up a will whether you are an attorney or just a lay person if you have a boiler plate to go by (from a book or the internet) or make up one, and have it properly witnessed and (hopefully) notarized for it to be legal.

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Originally Posted by twinkiedooter

Judy - never said I was attorney. I was a paralegal and prepared many wills and notarized same. States were Florida and Ohio. There the wills required two witnesses and a notary to be legal. Thank you. In NYS it may be quite a different story not to have wills notarized but just witnessed. I can't imagine why they would not be! Anybody can make up a will whether you are an attorney or just a lay person if you have a boiler plate to go by (from a book or the internet) or make up one, and have it properly witnessed and (hopefully) notarized for it to be legal.

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Nope, not notarized in NYS, 2 and sometimes 3 witnesses - maybe you are talking simple Wills and I am talking complicated Wills but I would be afraid of a Will off the Internet, out of a book, "made up." Not criticizing you, just would concern me. Of course, I don't get involved until there's a problem so I don't see all the Wills and estates that don't require some sort of investigation because there's a problem.

I am somewhat concerned because I am the Executrix of my best friend's Will, she lives in Tampa, Florida and I just looked at a copy - it's witnessed but not notarized. I never thought about it before and don't know who prepared it for her.

If she had it prepared and signed in Florida then somebody slipped up and didn't have it notarized! Any of the wills I ever made up always had a jurat. Maybe she had it prepared in another state and is OK if it followed the state's laws in the preparation.

If your friend has a complicated will and not a simple will, I would certainly suggest she has it re-done in Florida because you and I both know Probate Courts can be a b**tch and take long enough without adding a factor of having another delay!!

As I understand it notarization simply is verification that the identity of the signer has been checked and confirmed. I really don't see why it would be necessary for witnesses of a will to have their signatures notarized.

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Originally Posted by twinkiedooter

If she had it prepared and signed in Florida then somebody slipped up and didn't have it notarized!! Any of the wills I ever made up always had a jurat. Maybe she had it prepared in another state and is ok if it followed the state's laws in the preparation.

If your friend has a complicated will and not a simple will, I would certainly suggest she has it re-done in Florida because you and I both know Probate Courts can be a b**tch and take long enough without adding in a factor of having another delay!!!

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I called her this AM and she is calling the Attorney who prepared it (in Florida) - maybe there's a last page that I don't have - but she doesn't know.

And, yes, Probate is a thrill a minute.