I found this link: http://www.cracked.com/funny-4179-credit-cards/ and it posed a question for me: Let's say that someone dies and has a credit card debt. They have no other assets. The bank would have to wear it right?
Who pays your credit card off if you die?
- Thread starter Graingrower
- Start date
chances are the estate may have something somewhere like some old life policy
We dont yet have genetic debt............yet
ta
rolf
We dont yet have genetic debt............yet
ta
rolf
Your debts get paid out of your estate. If there are not enough assets in the estate then the estate can go bankrupt - creditors get nothing, or share in whats assets are left. Just like if you were to go bankrupt while alive.
Rolf, Life insurance wouldn't be available to creditors. There is section in the life insurance legislation which prevents this.
So, a potential strategy could be to use trusts to invest (with no loans to the trusts from yourself). Be impercunious. Get huge life insurance policy and crank up hte credit cards before you die.
Rolf, Life insurance wouldn't be available to creditors. There is section in the life insurance legislation which prevents this.
So, a potential strategy could be to use trusts to invest (with no loans to the trusts from yourself). Be impercunious. Get huge life insurance policy and crank up hte credit cards before you die.
I guess creditors would have access to trust assets if the trust is a guarantor of the loan?
Lets see - the trustee would need to have guaranteed a loan that the individual took out. This would be rare I imagine. I can think of the case of a trust owned house and the individual borrowing from a bank in their own name using the house as security. This would only be possible if the trust deed would allow the trustee to mortgage property for an individual beneficiary.
What is more likely to happen is that the trust makes a distribution to a person who leaves the money into the trust and does this over time and has their loan account build up. The person would be owed money by the trustee and if the person were to die then their estate is due to be repaid. This can happen and one of my clients trusts is being sued by the estate of his late mother because of this.
So, to avoid this it is best for the trustee to make an actual distribution and then for the individual to gift the money back to the trust - otherwise it is dangerous if death happens or bankruptcy.
