Smart Money: Estate responsible for late husband's debts

Bruce Williams is a national radio talk show host and syndicated columnist

Dear Bruce: My husband passed away last month. He has an outstanding balance of $12,000 on a credit card. My name is not on the card. Is this debt now my responsibility? D.G., Bullhead City, Ariz.

Dear D.G.: Because the debt was acquired during your marriage, your husband's estate and that extends to you - is responsible for the debt. Any assets your husband left behind have to be used to pay his obligations. If the assets are not sufficient, you will be held responsible. If the debt were incurred before you were married, it would be a different matter. You indicated in your letter that money is a problem, and I sincerely empathize with you. I think you will find that if your husband left a will and you are the executor, you will be obliged to settle this out of his assets.

Dear Bruce: Would you give your opinion on whole-life insurance? I'm 40, married with two children, ages 10 and 12. S.M., via e-mail

Dear S.M.: You didn't mention why you are thinking about life insurance. If you want to protect your children in case of your demise, term insurance would be the wisest way to go; you'll get the most bang for the buck.

Whole-life insurance does have some attractions, but, by and large, even in today's somewhat shaky investment climate, you can do better by buying whatever term insurance is necessary and investing the difference. Insist on a renewable, convertible policy without evidence of insurability. That means that after the end of the selected term 10, 15 or 20 years you can renew it without the insurance company's option to deny the renewal. Like every other buy, you should shop the market carefully, since premiums can vary widely from company to company for the same coverage.

Dear Bruce: My 75-year-old husband resides in a nursing home due to an injury he received on the job. Workers' compensation is paying for it. I'm a "young" senior citizen, and my children are concerned that I may have to have nursing home care, thereby dissipating my estate. My children are urging me to put my home and bank accounts in their name so that they will not lose their inheritance. I want to keep control of my life, so I have chosen not to do what they ask. They say I'm being very foolish and selfish. What do you think? Parent of misinformed offspring

Dear Parent: Your kids aren't misinformed, they're greedy. They want you to go on Medicaid so that anything you've earned that should be spent on you will be theirs to spend as they please. I can understand that some folks do not wish to have all of their assets spent on their care. You are obviously more independent and feel that your money should be spent as you direct. I would tell your kids to take a hike. They are only thinking of themselves.

Dear Bruce: I retired after working for 40 years. I have a great pension, no debts (the house is paid for) and only normal monthly utilities. My mom recently passed away and left me a considerable amount of money. I would like to invest it in a Roth IRA, some growth mutual funds and money market accounts. I am conservative and am not looking for anything high risk. J.A., Grand Blanc, Mich.

Dear J.A.: It sounds to me like you are set financially. Today's interest rates are at a very low point, and if you are risk-averse, you must be prepared to accept these low rates. Having said that, there are some good corporate bonds. If this is still too risky for you, you will have to be content with government bonds and/or certificates. Bear in mind that you can buy certificates of varying rates from banks that are not in your immediate area. As long as they are FDIC-insured, it really doesn't matter if the bank is 2,000 miles away. Roth IRA deposits are restricted to earned, not investment, income. Hence, you may be ineligible.

Dear Bruce: I have been told that even if a person has a will, the executor can write out checks to the heirs without the aid of an attorney. As the executor of my mother's will, I want to be certain that I do the right thing when the time comes. B.F., Pennsylvania

Dear B.F.: Assuming that you are named executor or personal representative in the will, the appropriate thing to do is to file the will for probate with the probate court or, in your state of Pennsylvania, the Widows and Orphans court. Your job is to carry out the wishes of the decedent. Your first obligation is to pay all legitimate debts before any of the estate is distributed. Then, under the guidance of the court, you will distribute the residual. The rules differ from state to state. While it certainly isn't necessary to retain the services of an attorney on a percentage basis, you might wish to consult with one on an hourly basis, which should be established before he begins to work. On a relatively simple estate, the fees should be very modest.

Dear Bruce: This is in response to the woman who was upset that her mother borrowed money against her house for a sibling, and the sibling is making no effort to pay it back. I would have advised the mother to rewrite her will and deduct any of the unpaid loan from the share of that child's estate. That way if she dies before she is repaid, the other children's portion of the inheritance is adjusted to make up for any outstanding loans. S.B., via e-mail

Dear S.B.: Thank you for your comments. That is one solution, but I believe your thoughts are a tad flawed. It is not necessary to be even-handed in our handling of estate matters. If I was bamboozled, I would consider cutting this person out of my will altogether. I realize this could cause problems within the family, but I have never been persuaded that it is imperative to have each heir treated equally.

Dear Bruce: My husband and I are near 70. We would like to stay in our home as long as we are physically able, but our expenses are now more than our income. We are considering a reverse mortgage, but our children don't agree with us. We would like to hear your thoughts. D.W., Hernando, Fla.

Dear D.W.: Essentially, you are borrowing money against the equity in your home with a reverse mortgage. Since both you and your husband are not yet 70, statistically you have many years to live, and the amount that the lender advances you would be small. I do not think that is in your best interest. The older you are, the more viable a reverse mortgage becomes. An outright sale may be an appropriate option; at least I would explore it. Perhaps a smaller home would make your life easier and less expensive.