single parent - parent is uninsured - runs up a large medical bill (50k+) - parent dies

the way I understand it is that in NC if the parent dies and both the grandparents and children are alive that creditors are allowed to go after any assets that the parent might have but that the medical bill would not transfer to either the children or the grandparents

this is from some google searching though and I could have missed something - I'm looking more for facts pertaining to NC rather than discussion on people's thoughts of how it SHOULD work

if the parent has less than 10k in assets does the medical bill just disappear after those assets are obtained? can this be avoided by "selling" the assets to someone else prior to death?

is life insurance/401k/pension looked at as an asset that can be tapped to pay off creditors upon death? can you drain the 401k (possibly taking penalties if prior to 59.5) to avoid it being tapped?

please fill in any blanks i may have left out

10/16/2006 1:50:03 PM

Debt CAN transfer to relatives. But only in the form of an asset that has yet to mature. If you have a house worth $200,000 and your dad paid $150,000 and willed you the house, then you get the house plus the $50,000 debt.

However, anything else that is not attached to an asset cannot be transferred to you... credit card debt, medical bills, etc. They may try, but I don't believe that you can be personally liable.

About the bill disappearing... that's largely what it does and it becomes a tax writeoff for the medical institution.

[Edited on October 16, 2006 at 1:56 PM. Reason : .]

10/16/2006 1:53:36 PM

don't know about life insurance or pension, but i know that 401k assets are protected from creditors, even if you declare bankruptcy.

10/16/2006 1:54:18 PM

I didn't know that... I figured that all assets would go to paying off debt before the rest was distributed to the willed.

10/16/2006 1:55:43 PM

Some items are immune from that. Qualified retirement plans are among them.

Be careful with gifting/selling the assets to avoid creditors, because the government has lookback provisions to keep you from getting away with that sometimes.

Talk to a CPA and/or an estate planner about this issue.

10/16/2006 1:58:23 PM

I was under the impression the entire estate is liquidated to pay any creditors, but under no circumstances shall debt be transferred. Like bg said, be carefull about the govt's lookback provisions.

Quote :

"i know that 401k assets are protected from creditors"

I'm pretty sure the IRS can levy your retirement accounts.

[Edited on October 16, 2006 at 2:33 PM. Reason : ]

10/16/2006 2:26:41 PM

You're right. Only private creditors were being referred to, methinks.

10/16/2006 3:06:02 PM

great comments/advice so far - keep them coming

10/16/2006 3:06:10 PM

Omar, I wish I could help you but I can't for 2 reasons.

1) Talk to an estate planner or CPA, they can help you more than our TWW Legal Staff
and
2) I'm only licensed to give Investment Advice in SC and GA. Not that I wouldn't help you out if I knew more, but I don't know NC laws at all.

10/16/2006 4:19:37 PM