WHO IS RESPONSIBLE FOR PAYING A DECEDENT’S DEBTS?

The last thing anyone wants when a loved one dies is to be harassed by that person’s creditors.  Unfortunately, it happens all too often.

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By: Jessica L. Estes

The last thing anyone wants when a loved one dies is to be harassed by that person’s creditors.  Unfortunately, it happens all too often.  The mail comes, and in it, a letter from a creditor expressing their condolences and wanting to know who is responsible for paying the bills.  Having just lost a loved one, you are not sure what your obligations are, nor is that your top priority.  Likely, you toss the letter aside; you will deal with it later.

But, the creditor will not be deterred and a couple weeks later, another letter comes.  This time, the creditor references the prior letter that received no response and again asks who the responsible party is.  Having had some time to process everything, you read the letter and notice it is an official “attempt to collect a debt” and get worried that you may be in trouble if you do not pay.  So, you assume responsibility for the debt and set up a payment plan with the creditor.  Or, you try to negotiate the debt and only pay a portion of it.  This makes the creditor happy because you just assumed a debt for which you may not have been liable.  But, at least the creditor is gone and will not bother you anymore, right?  But at what cost?

I hear this a lot and usually only after the person has already assumed the debt and/or made payment, which is too late.  Unfortunately, creditors know that right after a death you are not in the right state of mind to be dealing with them and often take advantage of the situation.  Do not succumb to the pressure.

Legally, the only person responsible for a debt is the one who incurred the debt, or who guaranteed a debt.  Once that individual dies, the only responsible party is that person’s probate estate.  Generally, creditors have six (6) months from the date of the decedent’s death to file their claim against the decedent’s estate.  If the creditor fails to file timely their claim, the creditor is forever barred from collecting it.  This is true even if a probate estate is not opened within six (6) months; the creditor still has an obligation to file their claim with the Register of Wills for the county in which the decedent resided at death, to preserve their claim. And, if the decedent did not have any assets to probate, even if the creditor timely files their claim, they will not be paid, as there will not be any assets in the estate from which to pay them.

Moreover, there is a difference between unsecured and secured creditors.  Typically, unsecured creditors are the ones sending these types of letters, as their debts are not tied to any assets from which they can collect the debts (e.g. credit card companies).  Secured creditors, on the other hand, have collateral which may be sold to pay off their debt (e.g. a mortgage company has the right to foreclose on the property securing the debt if payment is not made).  Secured creditors are not necessarily bound by the same rules as explained above, since secured creditors always have the right to sell the collateral to pay off their debts any time payment is not made.  (NOTE: If you want to keep the property that secures the debt, make sure payments continue to be made.)  But, if the collateral’s value is insufficient to cover the entire debt, the secured creditor must also timely file a claim as indicated above, or any portion of the debt the collateral does not cover will be forever barred.

So, the next time you or someone you know receives one of these letters, let the creditor know you are not the responsible party.

#TuesdayTips: Major Changes for Maryland’s 2019 Estate Tax Exemption  

Effective July 1, 2018, for individuals dying on or after January 1, 2019, the Maryland estate tax exemption will be $5 million.  This is a drastic change from the 2014 law that gradually increased the Maryland estate tax exemption each year until 2019 when it was scheduled to match the federal basic exclusion amount. 

 

By Jessica L. Estes

Effective July 1, 2018, for individuals dying on or after January 1, 2019, the Maryland estate tax exemption will be $5 million.  This is a drastic change from the 2014 law that gradually increased the Maryland estate tax exemption each year until 2019 when it was scheduled to match the federal basic exclusion amount.

Under the 2014 law, Maryland’s estate tax exemption was scheduled to increase beginning January 1, 2019 to match the federal exclusion amount, which was anticipated to be $11.4 million.  Further, under the 2014 law, Maryland’s estate tax exemption would have continued to increase based on inflation.  Now, however, Maryland has decoupled from the federal exclusion amount and Maryland’s exemption amount will remain static at $5 million, with no adjustment for inflation in the future.

Though, Maryland’s new law does provide that a surviving spouse may use any unused portion of his/her deceased spouse’s Maryland exemption (“portability”).  The unused portion of the deceased spouse’s exemption would be in addition to the surviving spouse’s $5 million exemption, but only if certain requirements are met.  For predeceased spouses dying on or after January 1, 2019, there must be a timely filed Maryland Estate Tax return on which is calculated the unused portion and an irrevocable election is made to use such unused portion at the surviving spouse’s death.  For predeceased spouses dying before January 1, 2019, or who were not Maryland residents and did not have taxable property within Maryland, there must be an election under §2010(c) of the Internal Revenue Code (“IRC”) on the predeceased spouse’s Federal Estate Tax return.

Moreover, Maryland’s new law does not provide any retroactivity, so if you have a predeceased spouse that died before July 1, 2018 (the date this new law takes effect) and there was no Federal Estate Tax return filed with an election under §2010(c) of the IRC, you will not be able to take advantage of the portability component of the new law.  Similarly, if you have a spouse that dies prior to the end of this year, you will want to consult with an attorney to make sure a timely election is made to preserve any unused portion of your predeceased spouse’s Maryland exemption.

In summary, instead of an estimated $11.4 million exemption per person, both federally and for Maryland, individuals dying on or after January 1, 2019 will now be limited to a $5 million exemption for Maryland, with the possibility of portability for married couples, but only if timely elections are made.  Even though this is roughly a $6.4 million difference, Maryland still does not have a gift tax so any gifts during an individual’s lifetime would not count against their $5 million Maryland exemption at death.

#FamilyFriday: Family Support Services

Families often wonder what resources are out there to help them in the midst of a family related litigation case.  There are numerous services available that can be requested by either party involved in the litigation and ordered by the Court.

By: Valerie E. Anias, Esq.

Families often wonder what resources are out there to help them in the midst of a family related litigation case.  There are numerous services available that can be requested by either party involved in the litigation and ordered by the Court.  On this week’s #FamilyFriday article, ERA Law Group, LLC discusses some of those services.

  1. Mediation. The Court often orders the parties to complete mediation early on in litigation.  This tool is especially helpful in limiting the issues at hand and encouraging families to settle their disputes.  As discussed in earlier #FamilyFriday articles, it is often recommended that families seek mediation services before filing suit.
  2. Custody Investigations/Evaluations. Upon request from a party or by the Court’s own initiative, a custody evaluation can be ordered.  A trained third party professional, will be required to conduct an interview of each party, an interview of the child(ren) (if the child has the capacity to be interviewed), a review of relevant records pertaining to the child, and an observation of the child with each party.  At the conclusion of the review, the evaluator will be required to report their factual findings of the needs of the child, the capacity of each party to meet those needs, and the evaluator’s recommendation as to custody and visitation.
  3. Mental Health Evaluations: Upon request from a party or by the Court’s own initiative, a party may be ordered to receive an evaluation by a mental health professional and in some cases psychological testing.  If one or both parties allege that a party suffers from a mental health issue which may impact the children, custody, and/or visitation, the party should motion the Court for the evaluation.  The Court will weigh the party’s allegations and decide whether to grant the motion and make such Order
  4. Substance Abuse Assessments: Upon request from a party or by the Court’s own initiative, a party may be ordered to undergo drug testing and/or assessment.  Depending on the outcome or the basis for the screening, the Court may then require random screenings and/or treatment related to the abuse.  This will also play a role in the Court’s determination of custody and/or visitation.
  5. Specific Issue Evaluation: Again, upon request from a party or by the Court’s own initiative, the Court may Order an evaluation based upon a specific issue related to one or both parties that affects the safety, health and/or welfare of a child.  The Court will analyze the specific issue and Order the evaluation by a professional with expertise related to that specific issue.

To discuss your case and about services that may be available to you, call ERA Law Group, LLC today at (410) 919-1790 to schedule your FREE 30 minute consultation!

#FamilyFriday: ERA’s Fixed Fee Family Services

Potential clients are often concerned with the expense associated with resolving their family disputes.  

By: Valerie E. Anias, Esq.

Potential clients are often concerned with the expense associated with resolving their family disputes.  It’s understandable as these matters can accrue substantial legal fees.  In this week’s #FamilyFriday article, ERA Law Group, LLC discusses ways you can mitigate your expenses and how we can help!

  1. Mediation. Mediation is often a less litigious and less expensive means to resolve your dispute.  Often families need the assistance of a third party that can help guide the parties, fueled by emotion, towards a resolution.  The resolution is ultimately up to the parties but having that guide can be beneficial and save you the time and energy of duking it out in the courtroom.  ERA offers mediation services for families that are separating, needing a modification, attempting to develop a parenting plan, drafting a property settlement agreement, and more.  Our fees are $250.00 per hour to be split equally among the parties.
  2. Uncontested Divorce by 12 Month Separation. In those cases where families have been separated for 12 months and are proceeding with their divorce uncontested, ERA offers fixed fee services ranging from $500.00 to $1,500.00.  Generally these partners will have a Separation Agreement already settling all disputes but this is not required.
  3. Uncontested Divorce by Mutual Consent. In these cases, married couples without minor children can get divorced without having to wait a certain period of time.  To be divorced by mutual consent, the couple must have settled all issues relating to their marriage.  ERA offers fixed fee services to complete the agreement and file the divorce.  These range from $2,500 to $3,500 depending upon the amount of marital property.
  4. Separation Agreements. You and your spouse want to discuss and settle issues related to any joint bank accounts, cars, real property, debt, retirement, and alimony before filing for divorce.  Hiring an attorney to draft the settlement agreement to ensure it contains all necessary contract language and covers all potential property disputes is important to make sure you truly have settled all property issues.  Additionally, sometimes parties think they’re on the same page only to learn that they’re not.  Discussing these issues initially allows for a smooth settlement and divorce. ERA fixed fees range from $2,000 to $3,000.
  5. Parenting Plans. Parenting Plans encourage parents to focus on the needs of their children, how best to co-parent, and how to anticipate and/or address the various changes in their lives at the time of its creation and in the future. It also allows the parties to decide what is in the best interest of their children rather than leaving it up to a Judge.  Often the Judgment of Absolute Divorce is silent on many issues which results in parties having to come back to Court for future modifications.  A well-drafted Parenting Plan can resolve many, if not all, of these issues.  More importantly, it allows parents to come together as parents – not as spouses.  They may no longer be spouses but they will always be parents.  ERA fixed fees range from $1,500 to $3,500.
  6. Pre-Nuptial and Post-Nuptial Agreements. Marriage is both a romantic and business relationship. With very few exceptions nearly everything is or becomes marital.  As such, nearly everything can become subject of costly litigation in the event of divorce or death.  A well drafted and all-inclusive pre-nuptial or post-nuptial agreement will limit many of these issues.  For example, the agreement will identify what is and is not marital property, each parties’ rights in the event of death or divorce, predetermine rights and obligations for spousal support, inheritance, and more.  In addition, the agreement will have a complete financial disclosure including each spouses’ assets, liabilities, and income.  ERA’s fixed fees range from $2,500 to $5,000.

Call ERA Law Group, LLC today and schedule a free 30-minute consultation regarding your family related matter at (410) 919-1790.

#FamilyFriday: Nesting Agreements

It is difficult to imagine your children living somewhere other than their home.  There is an alternative!

Children and finances are two driving factors in a divorce.  How will your children handle the idea of their parents separating and how will your bank accounts suffer?  Finding a separate living space, especially one that can accommodate your children, during your divorce is difficult.  It is difficult to imagine your children living somewhere other than their home.  There is an alternative!  In this week’s #FamilyFriday article, ERA Law Group, LLC discusses an alternative approach called Nesting Agreements.

While parents are divorcing and sorting their finances, one alternative approach is to develop a nesting agreement.  Nesting agreements allow the children to always remain in their home while the parents take turns residing there.  For example, perhaps parent 1 resides in the home Monday from school pick up through Thursday school drop off and parent 2 resides in the home from Thursday school pick up through Monday school drop off.

During this nesting time, the parties can agree to maintain a joint account that each contribute to for paying household bills.  Perhaps the parents can stay at a family member’s home during the time they are not with the children or get a small 1-bedroom apartment in the interim.  It allows couples to work through the nitty gritty of their divorce while keeping stability for their children.

An important consideration is how well you and the other parent can communicate and co-parent.  At times, the feelings or circumstances involving the divorce don’t allow for that to happen effectively.  In those situations, a nesting agreement would not be beneficial.

If you’d like to consider a nesting agreement or some other alternative approach to separation and sharing custody, contact ERA Law Group, LLC today at (410) 919-1790 to learn more!

#TuesdayTips: Veterans’ Benefits

As Memorial Day approaches, I am reminded of the sacrifices our Veterans have made so we, the people, can retain our freedoms.  Many of these veterans require some form of long-term care; yet, very few are aware of the benefits that may be available to help them pay for that care. 

As Memorial Day approaches, I am reminded of the sacrifices our Veterans have made so we, the people, can retain our freedoms.  Many of these veterans require some form of long-term care; yet, very few are aware of the benefits that may be available to help them pay for that care.

If you are a Veteran or surviving spouse of a deceased Veteran and your income is not sufficient to cover your long-term care expenses, you may qualify for a benefit called Aid and Attendance through the U.S. Department of Veterans Affairs (“VA”).  This benefit provides a monthly, tax-free income for the Veteran or surviving spouse who needs assistance with at least two activities of daily living and who is in a nursing home or other facility or paying for care at home.

There are four basic eligibility requirements for the Aid and Attendance benefit: (1) you must be 65 or older, or permanently disabled; (2) your discharge from the military must be anything other than dishonorable; (3) you must have served at least ninety (90) days on active duty, but those days do not have to be consecutive unless service began after September 7, 1980, or any length of active duty if the Veteran has a service-connected disability discharge; and (4) one of those active duty days must have been during a period of war.  For VA purposes, the periods of war include the Mexican Border Period, World Wars I and II, the Korean Conflict, Vietnam Era and Persian Gulf War.

In addition to the eligibility criteria, the Veteran must also meet the entitlement requirements.  For a Veteran to be entitled to the benefit, the Veteran must pass the income and asset tests.  Generally, if the Veteran’s liquid assets are less than $80,000 and their income is less than their unreimbursed medical expenses, then the Veteran or surviving spouse will be eligible for the benefit.  Unreimbursed medical expenses include, but are not limited to, health insurance premiums (Medicare, supplemental insurance, etc.), prescription co-pays, doctor co-pays, nursing home or assisted living facilities or in-home caregivers.

When determining countable assets, the VA does not count the equity in a primary residence and household furnishings, vehicles, pre-paid burial plans, term life insurance, irrevocable trusts and qualified annuities.  If the Veteran’s countable assets total $80,000 or more, a claims examiner will determine if the Veteran’s net worth is excessive and a bar to entitlement of the benefit.

Moreover, a Veteran eligible for the benefit and who has a dependent spouse, will be entitled to $2,169 per month. An eligible single Veteran will be entitled to $1,830 and an eligible surviving spouse will receive $1,176 monthly.

As with any government benefit, the application process can be daunting.  If you need assistance filing an application for benefits, contact a VA accredited consultant.  They can assist you in making sure you have a fully developed claim.

#TuesdayTips: Caring for Aging Parents

Currently, it is estimated that approximately one-third of the U.S. population provides care for a chronically ill, disabled, or aged family member and spends, on average, twenty hours per week providing that care.  Caring for your aging parents is not an easy task. 

 

By Jessica L. Estes 

Currently, it is estimated that approximately one-third of the U.S. population provides care for a chronically ill, disabled, or aged family member and spends, on average, twenty hours per week providing that care.  Caring for your aging parents is not an easy task.  Not only can it be overwhelming, but it may cause stress in your life which can manifest itself in various ways, including illness, depression and/or anxiety, or strained family relationships. There are things you can do, though, to make the job less stressful.

First, it is important to know your parent’s personal wants and needs.  Satisfying those requirements will depend largely on the type of long-term care your parent is likely to require.  For most, living independently for as long as possible is ideal.  Usually, this requires that the parent stay healthy both physically and mentally, so the more physical and social activities your parent participates in, the more likely they are to maintain their health and independence.

Second, you and your parent should discuss where the caregiving is going to take place.  Will your parent be moving, or will you travel to your parent?  Any decision in this regard will have an impact on your immediate family (i.e. your spouse and/or children) so they should be included in that part of the discussion.  To determine the best housing option for your parent, you will need to compare the costs of any modifications to the home as well as the cost of assistive devices needed to continue to reside in their home, with the costs of an assisted living or nursing facility.  Also, be sure to check if there are any in-home or community services available to assist with transportation, shopping, housekeeping or yard-work and their respective costs.

Next, there should be a discussion about end-of-life care.  Make sure your parent has a health care power of attorney and an advance directive or living will.  Also, if your parent has any final disposition instructions for their body after their death, they should be included in these documents as well.

Finally, what is your parent’s financial situation?  Do they have sufficient funds to pay for their long-term care?  If not, what programs are available to pay for that type of care?  Generally, Medicaid is the only program available to pay for long-term care, but it is a needs-based program so your parent will have to meet the eligibility requirements.  You should make sure your parent has a durable financial power of attorney that names an agent to manage their finances if they become incapacitated or incompetent.  That agent also should be made aware of what income and assets your parent has and where the assets are located.

Organizing the caregiving duties into the above four manageable categories: personal, housing, medical and financial, will keep you calm and able to focus on specific tasks rather than feeling overwhelmed by everything all at once.  Call ERA Law Group, LLC today at (410) 919-1790 and ask how we can help!