Secret Debts Emerge at Death--and His Widow Will Probably Have to Pay
Q. In May of this year, my brother died of a brain aneurysm. He was taught by our father not to trust women, especially a wife, so everything was in his name--all the credit cards, the house, his car, everything. In 23 years of marriage, he never told his wife what bank accounts he had, what credit cards he carried or what debts he was running up--and the debts have turned out to be considerable. The only thing my sister-in-law had were her clothes and a car she bought. My question is, is she liable for his debts? Does she have any way out of the mess my brother created for his own personal gain?
A. What a peach. I’m sure you all will miss this charmer.
Assuming Mr. Wonderful didn’t have a will, under California law all the assets will go to your sister-in-law as well as any debts attached to them. The house, for example, probably has a mortgage; she would inherit both. (If he did have a will and didn’t give everything to her, it gets a little more complicated.
Still, she almost certainly will be entitled to a good chunk of the estate, because money earned during a marriage and property bought with that money are considered community property in California.)
She may be able to get out from under some of the unsecured debt if she wants to let at least some of the property go through a court process known as probate.
In probate, creditors are given a specific time period to make claims on an estate. If the creditors don’t speak up in time, they’re pretty much cut out forever and won’t be able to attach property that your sister-in-law inherits from your brother. A probate attorney can talk to her about the mechanics.
Is this ethical? It’s up to your sister-in-law to decide. California law usually views debts incurred during marriage as jointly owed. Ignorance of the debt is typically no excuse. Your brother’s death created a loophole that your sister-in-law might not have been entitled to take had he lived; she probably would have been on the hook with him to repay the money.
She could make a good argument that her spouse kept her in the dark. On the other hand, there is little excuse for financial secrecy--or ignorance--in marriage, especially in a community property state where your financial fortunes are fused from the moment you say “I do.” If spouses don’t know every account their family owns, every investment and every debt, they should find out.
Shop Around for Life Insurance
Q. I had always heard that the cheapest way to buy life insurance was through your employer. But after spending some time on the Internet getting comparative quotes, I found that my group term life insurance at work is costing me at least twice what I would pay for a 20-year individual term policy! What’s the deal?
A. Remember a few weeks ago how I said there were no real rules of thumb in personal finance? Here’s a classic example.
Typically, term life insurance through an employer is a good bet. It’s almost certainly the best bet if you smoke, are overweight, have any health problems or engage in scary hobbies such as skydiving.
But what you’re buying is usually a one-year policy that’s priced based on your employee group as a whole. If you’re younger, in better health or working at a less dangerous job than your average co-worker, you may be paying more than you would with an individual policy.
The coverage is also temporary; you could lose it should you leave your job. While your employer’s insurer must offer to convert your coverage to an individual policy, the cost and terms may not be to your liking.
If you opt for buying coverage on your own, you’ll probably have to pass a medical exam. Also understand that the rate you were quoted on the nifty Web site could be adjusted up (or down) based on factors that weren’t included in the one-size-fits-all Internet survey.
Finally, make sure you deal only with top-rated companies. The last thing you want is an insurance company failure complicating your life.
Clear Hindsight, Lousy Foresight?
Q. You recently chided a couple who used U.S. Savings Bonds to save for their children’s educations by showing how much better Microsoft did over the last 10 years. My question is: Were you recommending that your readers buy Microsoft in June 1989? Please look back and tell me how the stocks you actually recommended then are doing now. Seems to me you’ve got 20/20 hindsight, but how’s your foresight?
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A. Pretty lousy, which is why I don’t tout individual stocks. If you ever do hear me making a recommendation at a cocktail party, darlin’, ignore it. That’s what my daddy did, thank goodness, when I told him to sell Microsoft in 1990.
Oh, yes, and I once suggested a reader get rid of her Apple stock, right before Steve Jobs came back and introduced the iMac. She blew me off, too, and has more than doubled her money. Is it any wonder that I tend to stick to index mutual funds for my own investments?
The Microsoft example was just to get your attention. The more relevant figure was the one that followed it: Investing in an index fund that mimicked the Standard & Poor’s 500 would have netted them nearly six times as much growth as the Savings Bonds. The time to be conservative is when you’re close to your goal. When you’re 10 or 20 years out, as these folks were with their kids, it makes more sense to bet on the growth you can get from stocks.
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Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.
