Five Things to Know About Creditors When Someone Dies

The death of a loved one brings forth a lot of emotions. While grieving can last a long time, at some point someone has to take a look at the financial affairs of the decedent. One big concern is debt, which can come in many forms: mortgage, credit card, personal loan, back taxes due, just to name a few. Understanding the basic rules can put your mind at ease if you take on the responsibility of estate/trust administrator. Here are some things to consider:

1. The first thing to understand is that taking on the responsibility of trustee or personal representative does not in any way make you personally liable for the decedent’s debts. Some collection agencies might try to coax you into thinking you have to pay from your own pocket, but it’s just not so. As long as you don’t personally guarantee a debt and you don’t try to hide the debt or do something illegal, you are never personally responsible.
2. Many, but not all debts are negotiable. This holds true for credit card debt in particular. Once the credit card company finds out the card holder has died, they typically sell the debt (at a very reduced rate) to a collection agency. If they contact you, it is appropriate for you to try to negotiate down the balance owed. I’ve seen the final negotiated bill be as little as one-third of the original bill, but there is no standard rule. Debt negotiation is an art form, and the more experience you have, the better chance you have to get the debt down. Your leverage increases if there is no need for probate (e.g. a living trust holds all assets). That’s because the collection agency then has to open a probate case themselves if they want to collect and that is time consuming and expensive for them. A quick settlement on the phone makes much more sense to them in that situation.
3. An outstanding mortgage is much less negotiable. The mortgage company has collateral they can get at — i.e. the home. By definition, a mortgage is simply a loan that is secured by real estate. Two things to know with a mortgage: First, you can call the mortgage company, and they are typically very flexible when it comes to mortgage payments. They will usually be compassionate and accommodating, but in the end, they will need their debt paid. Second, if the house is worth less than the outstanding mortgage, they will work with you because it is costly for them to try to recoup more than they can get for the house sale.
4. If the decedent had a trust or some of the estate was probated, then you are required to file a Notice to Creditors in a county legal newspaper. That is a good thing because in Michigan a 4-month deadline starts for unknown creditors to contact you. The deadline runs from the date the Notice to Creditors was first published and once the 4-month time period is up, even a creditor with a valid bill is out of luck – You don’t have to pay. I’ve used this effectively many times for medical bills that first show up after the 4-month period expires. Note that this legal debt cut-off only applies to bills you first learned of after the 4-month deadline.
5. Tax debt is different. The IRS is powerful, and the laws play in their favor. Take the initiative to make sure there is no outstanding tax debt before fully distributing the estate. The Notice to Creditors won’t protect you here either so check with the decedent’s tax preparer to make sure things are correct.
   It’s never easy to deal with the affairs of a deceased loved one. I hope the information above makes it a little more tolerable.

Fun Fact: After driving to and from Florida recently I got to wondering about our roadway system. I found it surprising that the United States has 3.9 million miles of roadway, of which 3 million miles are rural roads. The Interstate System accounts for only 1.2% of total mileage but carries 24.1% of total travel. I think most of those interstate travelers were congregated around Atlanta and Tampa when I was driving home last week!

COVID-19 PREPAREDNESS AND RESPONSE PLAN Prepared: May 22, 2020

Jeffrey R. Saunders, P.C./Saunders Financial, LLC COVID-19 Preparedness and Response Plan

In accordance with Executive Order 2020-59, Jeffrey R. Saunders, P.C./Saunders Financial, LLC (“Company”) institutes this COVID-19 Preparedness and Response Plan (“Plan”) which is on file and available for members and clients.

Jeffrey R. Saunders is hereby designated as the person responsible for implementing, monitoring, and reporting on COVID-19 control strategies, including training members as to workplace infection control practices and the proper use of personal protective equipment (PPE).

Company is continually monitoring guidance from local, state, and federal health officials and implementing workplace and Plan modifications where appropriate.

1.   Prevention Efforts and Workplace Controls

a.   Cleanliness and Social Distancing

Members of Jeffrey R. Saunders, P.C./Saunders Financial, LLC will whenever feasible, perform their essential duties remotely.
Company provides members with, at a minimum, non-medical grade face coverings.

In addition, Company is instituting the following cleanliness measures:

• Performing routine environmental cleaning and disinfection of workspaces;
• Requesting that the landlord disinfect all common areas frequently and regularly; and
• Where available, providing hand sanitizer.

Members will minimize COVID-19 exposure by:

• Frequently washing hands with soap and water for at least 20 seconds;
• Utilizing hand sanitizer when soap and water are unavailable;
• Avoiding touching their face with unwashed hands;
• Avoiding handshakes or other physical contact;
• Avoiding all contact with sick people;
• Practicing respiratory etiquette, including covering coughs and sneezes;
• Seeking medical attention and/or following medical advice if experiencing COVID-19 symptoms; and
• Complying with self-isolation or quarantine orders.

b.   Supplemental Measures Upon Notification of COVID-19 Diagnosis and/or Symptoms

A member with a COVID-19 diagnosis or who displays symptoms consistent with COVID-19 will self-isolate for at least 14 days and until symptoms are resolved.

c.   Member’s Self-Monitoring

Members will not report to the office work site if they:

• Display COVID-19 symptoms, such as fever, cough, shortness of breath, sore throat, new loss of smell or taste, and/or gastrointestinal problems, including nausea, diarrhea, and vomiting, whether or not accompanied by a formal COVID-19 diagnosis;
• In the last 14 days, have had close contact with and/or live with any person having a confirmed COVID-19 diagnosis; and
• Who, in the last 14 days, have had close contact with and/or live with any person displaying COVID-19 symptoms, such as fever, cough, shortness of breath, sore throat, new loss of smell or taste, and/or gastrointestinal problems, including nausea, diarrhea, and vomiting.

Such members may only resume in-person work upon meeting all return-to-work requirements, defined below.

d.   Return-to-Work Requirements

Members who were themselves diagnosed with COVID-19 may only return to work upon confirmation of the cessation of symptoms and contagiousness, proof of which may be acquired via the test-based strategy or the non-test-based strategy.

The test-based strategy is preferred but relies upon the availability of testing supplies and laboratory capacity. Under this strategy, members may discontinue isolation and return to work upon achieving the following conditions:

• Resolution of fever without the use of fever-reducing medications;
• Improvement in respiratory symptoms (e.g., cough, shortness of breath); and
• Negative results of an FDA Emergency Use Authorized molecular assay for COVID-19 from two consecutive nasopharyngeal swab specimens collected at least 24 hours apart.

Under the non-test-based strategy, members may discontinue isolation and return to work upon achieving the following conditions:

• At least 3 days (72 hours) have passed since recovery defined as resolution of fever without the use of fever-reducing medications;
• Improvement in respiratory symptoms (e.g., cough, shortness of breath); and
• At least 7 days have passed since symptoms first appeared.

Members who came into close contact with, or live with, an individual with a confirmed diagnosis or symptoms may return to work after either 14 days have passed since the last close contact with the diagnosed/symptomatic individual, or the diagnosed/symptomatic individual receives a negative COVID-19 test.

2.   Conduct of Office Meetings

When working on-site at the physical office, Company abides by the recommended social distancing and other safety measures and establishes the following:

• All meetings will be limited to six persons maximum;
• Everyone is required to maintain physical distance no less than six feet apart; and,
• Everyone is required to wear a non-medical grade face covering.

3.   Plan Updates and Expiration

This Plan responds to the COVID-19 outbreak. As this pandemic progresses, Company will update this Plan and its corresponding processes.

This Plan will expire upon conclusion of its need, as determined by Company and in accordance with guidance from local, state, and federal health officials.

FDIC/NCUA Insurance for Revocable Living Trust Accounts at Banks and Credit Unions

Created after the 1929 market crash, the Federal Deposit Insurance Corporation (FDIC) insures bank deposit accounts like checking, savings, and CDs in case of bank failure. The basic insurance amount is currently $250,000 per customer account. If a bank becomes insolvent, the FDIC steps in and pays on insured accounts up to the account limit set forth above.

What FDIC insurance does cover:

• All types of savings, checking, money market and CD deposits.
• Cashiers checks and certified checks.

What FDIC insurance does not cover:

• Investment accounts like stock, bond or mutual funds.
• Annuities
• Life insurance
• Safe deposit boxes.
• Credit unions. BUT NOTE: Credit unions have separate but similar insurance coverage though the National Credit Union Association and thus have NCUA insurance with the same limits as FDIC insured accounts.
• Robberies and thefts. Banks and credit unions have separate “blanket bond” insurance to cover things like robbery, embezzlement, fire or flood.

People who have large amounts of cash in bank or credit union accounts sometimes become concerned if the amount they have on deposit is greater than the $250,000 insurance limit. Utilizing a living trust-based estate plan can substantially increase FDIC or NCUA insurance coverage.

When a revocable living trust is named as either the owner or the pay on death (POD) beneficiary of a checking, savings or CD account at an FDIC or NCUA insured institution, then calculating the amount of insurance coverage is determined by the number of beneficiaries the trust creator(s) named in the trust. If the trust creator(s) named 5 or fewer beneficiaries, then the insurance coverage is determined by multiplying $250,000 times the number of beneficiaries named. So, for example, if Bill and Mary Jones have a joint revocable living trust that names their 3 children as beneficiaries, any FDIC or NCUA insured account that is either owned by that trust or names that trust as the POD beneficiary has 3 x $250,000= $750,000 of FDIC or NCUA coverage.

If the trust names 6 or more beneficiaries, then the insurance amount might be calculated differently. If all the beneficiaries are entitled to an equal share, then the same calculation applies: Multiply the number of beneficiaries by $250,000. However, if the shares are not equal, the insurance is the greater of either (1) the sum each beneficiary’s interest up to $250,000 for each beneficiary, or (2) at least $1,250,000.

Utilizing a revocable living trust for estate planning purposes not only avoids probate but can also have the advantage of maximizing your bank account or credit union account protection in case of financial institution insolvency.