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Personal Finance from the Broke Perspective

Do Medical Bills Die With You? 5 Surprising Facts About Debt After Death

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Do medical bills die with you?
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Medical debt has become an overwhelming problem for many Americans. The Survey of Income and Program Participation (SIPP) estimates that Americans owe at least $220 billion in medical debt. More often than not, this debt slips into collections and is left unpaid. But what if you die before you’re able to pay off your medical debt?  Do medical bills die with you?

The short answer is medical bills don’t die with you. Medical debt though is considered unsecured debt. Unsecured debt includes things like student loans, credit card debt, and personal loans. These types of debt are handled differently than secured debt such as mortgages or car loans. While every situation is different, here we’ll share what happens to your debt after you die.

1. Your Estate is Responsible

Your estate pays your medical bills when you die
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Your estate will be responsible for your medical debt when you die. This means that all of your total assets will have to cover the cost of unpaid bills. If your estate is solvent, which means it can cover the debt, any unpaid medical bills will be settled during the probate process. Then any other assets will be distributed to heirs as dictated by the deceased person’s will. Some states however require heirs to be paid out first before any debts are settled.

2. Bill Collectors May Look to a Family Member to Pay

If your estate doesn’t have the funds to pay your medical debt, or is insolvent, usually the courts will determine how much creditors will receive for the debt. Sometimes, creditors completely write off the debt. Again, this is all dependent on federal and state laws. In some cases though, bill collectors may find next of kin to repay the debt such as a spouse, especially if you live in a community property state like California. If medical bills were co-signed, that person may be responsible for your unpaid debt.

3. Filial Responsibility Laws

Family taking responsibility for medical debt
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More than half of states have laws where adult children are responsible for their parent’s medical bills if they can’t pay. Usually, these laws don’t have to be enforced because Medicaid will cover the cost of these expenses. If the medical services aren’t covered by Medicaid though, your children could have to foot the bill.

4. Medicaid May Ask Your Estate to Repay Them

If you are a Medicaid recipient and over 55, when you die your state’s Medicaid may pursue your estate. Bills from nursing home care, hospital stays, or prescriptions could be collected from your estate. Your survivors won’t be held responsible, and debts will only be collected if you are not survived by a spouse or children under 21.

5. Does Medical Debt Effect Credit Scores?

Medical debt is handled differently than other forms of debt. However, if your medical debt is sold to a third-party collection agency, it can negatively impact your credit score after a period of time. Collection accounts for medical debt stay on your credit report for seven years which can significantly damage your credit.

Do Medical Bills Die with You?

While medical bills don’t die with you, how they are repaid after your death may vary. Each situation is unique so it’s best to contact an estate lawyer to discuss your specific situation. Are you worried about medical debt after you die? Leave your questions in the comments.

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Here’s How A Financial Power of Attorney Can Help You If You Have A Health Crisis

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In times of health crises, managing finances becomes a significant challenge. A financial power of attorney (POA) is a legal document that empowers a trusted person to handle your finances if you cannot. This tool is essential not just for the elderly but for anyone facing a sudden health issue. Understanding how a financial POA can serve you ensures your financial health remains intact while you focus on recovery.

Importance of Having a Financial POA

Having a financial POA in place is crucial for managing your financial obligations continuously. It lets your designated agent pay bills, manage investments, and maintain properties, ensuring nothing lapses during your incapacity. This is especially vital for ongoing financial commitments like mortgages or business operations. A financial power of attorney can prevent financial disasters from unattended duties.

Choosing the Right Agent

Selecting the right person for your financial POA requires careful thought. The agent should be someone you trust deeply, as they will control your financial assets. It is wise to pick someone financially literate who understands your financial goals and preferences. A family member, a close friend, or a professional advisor can hold this role, depending on your personal and financial situation.

Powers Granted to Your Agent

Your financial power of attorney can grant broad or specific powers to your agent, depending on your needs. Typically, the document lets the agent access bank accounts, sell property, manage real estate, and handle taxes. Tailor the POA to fit your exact requirements, ensuring your agent has just enough authority to manage your affairs effectively.

Legal and Financial Safeguards

Implementing a financial power of attorney provides important legal and financial safeguards. It ensures your financial matters proceed according to your wishes, even when you cannot manage them yourself. Additionally, a financial power of attorney helps avoid the costly and time-consuming process of court-appointed guardianship or conservatorship, which can also bring unwanted public scrutiny to your private financial matters.

Safeguarding Your Financial Future in Times of Health Crisis

Incorporating a financial power of attorney into your planning is a proactive step towards protecting your financial future, especially during health uncertainties. It not only secures your financial assets but also gives you peace of mind, knowing your affairs are in trusted hands. As health situations can evolve unpredictably, a financial power of attorney ensures seamless management of your financial responsibilities, allowing you to focus solely on your recovery.

10 Reasons the Wealthy Aren’t Giving Their Kids Money and Neither Should You

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Reasons the Wealthy Aren't Giving Their Kids Money and Neither Should You

In an era marked by rapid wealth accumulation, many of the affluent are taking a stand that might seem counterintuitive: they’re choosing not to pass their wealth directly to their children. This trend isn’t just a whim of the rich and famous; it’s a calculated decision rooted in lessons learned, psychological insights, and a vision for a sustainable future. Here are 10 reasons the wealthy aren’t giving their kids money and why you might consider doing the same.

1. Fostering Independence and Resilience

Fostering Independence and Resilience

Wealthy parents are increasingly recognizing the value of resilience and self-sufficiency. Handing over significant wealth can rob children of the opportunity to face challenges, solve problems, and develop a strong work ethic. By limiting financial support, parents encourage their children to pursue their passions, find their paths, and cultivate the grit necessary to navigate life’s ups and downs.

2. Avoiding Entitlement and Complacency

Avoiding Entitlement and Complacency

A common concern among affluent families is the potential for money to breed entitlement. When children grow up expecting large sums of money, they may lack motivation to achieve on their own. This complacency can lead to a lack of fulfillment and difficulty finding purpose in life. Many wealthy parents want their children to experience the satisfaction of earning their success.

3. Teaching Financial Responsibility

Teaching Financial Responsibility

Learning to manage money is a critical life skill. Wealthy individuals often emphasize the importance of their children understanding the value of money, budgeting, and investing. When children are given everything, they may not learn to appreciate the effort it takes to earn and save money, leading to poor financial decisions in the future.

4. Encouraging Philanthropy and Social Responsibility

Encouraging Philanthropy and Social Responsibility

Many wealthy parents aim to instill a sense of social responsibility in their children. By limiting their financial inheritance, they encourage their offspring to contribute positively to society and find meaningful ways to use their talents and resources for the greater good rather than focusing solely on personal wealth accumulation.

5. Preserving Family Relationships

Preserving Family Relationships

Large inheritances can sometimes lead to family disputes and strained relationships. Wealthy parents are keenly aware of this and often prefer to create structures that promote unity, such as family foundations or charitable trusts, rather than distributing wealth in ways that could cause conflict among siblings or other relatives.

6. Avoiding Dependency and Lack of Ambition

Avoiding Dependency and Lack of Ambition

The concern that financial handouts can lead to a lack of ambition is prevalent among the wealthy. They want their children to pursue careers and lifestyles driven by passion and ambition, not the comfort of an assured inheritance. The goal is to see their children lead fulfilling lives that are not solely dependent on family wealth.

7. Promoting a Strong Work Ethic

Promoting a Strong Work Ethic

A strong work ethic is highly valued among successful individuals, and they often attribute their achievements to hard work and perseverance. By not giving their children substantial sums of money, wealthy parents encourage them to develop their own work ethic, achieve personal goals, and understand the satisfaction that comes from hard-earned success.

8. Protecting Against Financial Mismanagement

Protecting Against Financial Mismanagement

Wealthy individuals are often concerned about their children’s ability to manage large sums of money wisely. Without the necessary financial acumen, young adults may be prone to making poor investment choices or falling prey to scams. Limiting access to wealth can serve as a safeguard against such pitfalls, allowing children to gradually learn financial management skills.

9. Encouraging Value-Driven Lives

Encouraging Value-Driven Lives

Many of the affluent believe in living lives driven by values rather than material wealth. They aim to pass on these values to their children, encouraging them to find happiness and fulfillment in relationships, achievements, and personal growth rather than in accumulating material possessions.

10. Preparing for a Changing World

Preparing for a Changing World

The world is evolving rapidly, with technological advancements and societal shifts that can render today’s fortunes obsolete tomorrow. Wealthy parents recognize the importance of preparing their children for an unpredictable future. By not relying solely on financial inheritance, children can become adaptable, forward-thinking individuals capable of navigating and succeeding in a dynamic global landscape.

What You Can Learn from Why the Wealthy Aren’t Giving Their Kids Money

What You Can Learn from Why the Wealthy Aren't Giving Their Kids Money

Ultimately, the decision by many wealthy individuals not to give significant financial gifts to their children is driven by a complex mix of values, foresight, and a deep understanding of the potential psychological impacts of wealth. This trend highlights the importance of fostering qualities like resilience, responsibility, and a strong work ethic—principles that hold value for families across the economic spectrum.