Help Will my family be liable if I decide to ruin my credit and take out a life insurance policy before I CTB?

[sundress]

Is this a bad idea? Thanks!

 

[weallneedtovent]

Generally, most life insurance policies have a 'cooling off' period for suicide. Mine's 12 months, so if i ctb in that first 12 months, the insurance doesn't pay out.

But yes, if you rack up loads of debt prior to death, your next of kin (or person named in will) inherits your debt, the same as any capital assets

 

[juraviel]

same thing im wondering! so i'll help you bump up this topic :)

it depends on where you live but surely it must be possible to exclude all family members from any inheritance both assets and debts.

 

[Makko]

Read the insurance terms & conditions before you sign. There will most likely be a suicide clause that explains in which cases the insurance is void.

 

[NeverGoodEnuff]

Please allow me to clarify how this works, at least in the US. I do not know about other countries.

If a life insurance policy names a beneficiary, i.e., John Doe, the proceeds of that policy are paid directly to that person. They do not go to the estate. This includes any account that names a direct beneficiary, IRA's, 401K's, bank accounts with a pay-on-death. If you rack up a lot of debt, that debt is to be paid by your estate, NOT by the insurance policy if the policy names a beneficiary other than the estate. Assets of the estate are used to pay off any debts of that estate. If there aren't enough assets, then the persons/entities to whom anything is owed are just SOL. Also, heirs of the estate and/or family members are NOT personally responsible for estate debts. The worst that can happen is that all estate assets are sold, used to pay off estate debts, and estate heirs get whatever (if anything) is left.

If you want to run up a lot of debt and purchase an insurance policy with the intent of using those policy proceeds to pay that debt, then the beneficiary of the policy should be "The Estate of (your name)".

Know that this is how it works in the US. I know this from personal experience. If you are in another country, check with an estate attorney. In fact, I recommend you check with an estate attorney no matter where you are. There may be rare exceptions to these rules.

 

[weallneedtovent]

Please allow me to clarify how this works, at least in the US. I do not know about other countries.

If a life insurance policy names a beneficiary, i.e., John Doe, the proceeds of that policy are paid directly to that person. They do not go to the estate. This includes any account that names a direct beneficiary, IRA's, 401K's, bank accounts with a pay-on-death. If you rack up a lot of debt, that debt is to be paid by your estate, NOT by the insurance policy if the policy names a beneficiary other than the estate. Assets of the estate are used to pay off any debts of that estate. If there aren't enough assets, then the persons/entities to whom anything is owed are just SOL. Also, heirs of the estate and/or family members are NOT personally responsible for estate debts. The worst that can happen is that all estate assets are sold, used to pay off estate debts, and estate heirs get whatever (if anything) is left.

If you want to run up a lot of debt and purchase an insurance policy with the intent of using those policy proceeds to pay that debt, then the beneficiary of the policy should be "The Estate of (your name)".

Know that this is how it works in the US. I know this from personal experience. If you are in another country, check with an estate attorney. In fact, I recommend you check with an estate attorney no matter where you are. There may be rare exceptions to these rules.

You're absolutely right that different countries have very different views on this, for the UK, the below stands:

If you have no will, your entire estate will be deducted your debts prior to the issuing of probate to your next of kin. If there is a larger debt than asset value, the next of kin will inherit you debt.

If you have a will, the above stands unless you have specifically stated otherwise,

 

[ItsTimeToExit]

You're absolutely right that different countries have very different views on this, for the UK, the below stands:

If you have no will, your entire estate will be deducted your debts prior to the issuing of probate to your next of kin. If there is a larger debt than asset value, the next of kin will inherit you debt.

If you have a will, the above stands unless you have specifically stated otherwise,

A simple Google search reveals....

Debt isn't inherited in the UK, which means that family, friends or anyone else cannot become responsible for the individual debts of the deceased. You're only responsible for the deceased person's debts if you had a joint loan or agreement or provided a loan guarantee.

When someone dies, debts they leave are paid out of their 'estate' (money and property they leave behind). You're only responsible for their debts if you had a joint loan or agreement or provided a loan guarantee - you aren't automatically responsible for a husband's, wife's or civil partner's debts.

https://www.nidirect.gov.uk/articles/debt-when-someone-dies

 

[weallneedtovent]

A simple Google search reveals....



https://www.nidirect.gov.uk/articles/debt-when-someone-dies

My solicitor told me something quite different! but found similar results after a google too, how odd...

 

[ItsTimeToExit]

My solicitor told me something quite different! but found similar results after a google too, how odd...

Sounds like you need a new solicitor.

 

[weallneedtovent]

Sounds like you need a new solicitor.

Not going to need one soon :P But yes, I never thought he was the most competent individual in the world