Should I buy life insurance for my 47-year-old mother?

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Dear Penny,

My mother is 47 and increasingly paranoid about her death. She is neither sick nor in bad condition. She is getting better at dealing with her sudden diagnosis of diabetes.

I think she is doing well for her age. She works full time and has few to no complaints. Personally, I think she’s just being paranoid, but she’s been asking me serious questions about life insurance policies for herself. She wants me to take out a policy on her, but I don’t want to take out a life insurance policy on my living mother whose death I am not looking forward to.

Nonetheless, she continues to ask me questions about her finances and what I (her 28 year old daughter) think she should do about her bad credit, old debts from decades ago, and what she should do. a past repossession. She asks me if her policies will go to that debt? Will his 401(k) go towards these debts? Or will it be safe for my sister and me?

As far as I know, she took out two life insurance policies and listed me as her 401(k) beneficiary. I don’t know what I would do if she died suddenly, because I have a very small family consisting only of my sister and my mother. (Her ex-husband/my father is separated). I thought his accounts, 401(k), life insurance policies and debts would be probated after he died.

She has many years ahead of her. I get the feeling she’s worried about the debt collectors going after the money she plans to leave my sister and me when she passes away. What could she do to avoid this? What is good advice for her to someone her age? I want her to live a good life now with her grandchildren and not worry so much about the future when she is gone.

-Worried girl

Dear concerned,

It’s normal for your mother to feel more aware of her own mortality after a sudden diagnosis. It is also normal that you, his beloved daughter, do not want to consider life without your mother.

Maybe your mom is going a little too far. Or maybe it just strikes you that way if she’s avoided talking about death and money until now. But estate planning is essential even for young and healthy people.

Your mom doesn’t have to worry about debt collectors coming after you or your sister. Children are generally not responsible for their parents’ debts until they are co-signers. Generally, their assets and liabilities form part of their estate and creditors’ claims are settled in probate court. It appears that these debts are old enough to have passed the statute of limitations. In that case, collectors wouldn’t be able to sue your mother over them or file for probate.

But not all assets go through probate. Assets such as life insurance policies and retirement accounts, including 401(k), go directly to the beneficiary. If your mother listed you and your sister as beneficiaries, the money goes directly to you both. Even if your mother died in deep debt, the creditors couldn’t touch that money.

My best advice for you, your mother and your sister is to have a deeply difficult conversation. Talk about what the impact would be in the awful scenario where your mother died tomorrow.

Obviously, his death would leave a huge void in your lives. But I guess you and your sister are both self-sufficient adults. If true, it appears that this void would not be financial. As part of this conversation, you should discuss your mother’s life insurance policies and other assets, as well as any debts. You should also ask her if she has a will and urge her to create one if she doesn’t.

If your mom already has two life insurance policies, she probably doesn’t need more life insurance. Instead, she must prepare for the likelihood that she will live another four or five decades.

That means maintaining strong health insurance now. Although it is quite expensive, she can also consider long term care insurance when she is in her late 50s or early 60s.

Your mom should also focus on saving as much as possible for retirement so she doesn’t depend on you and your sister for support. Although she worries about her untimely death, the risk is much greater that she will outlive all the savings she has.

It would also be a good time for her to focus on improving her credit. If she can’t get a credit card due to bad history, she could open a secured credit card with a down payment and start rebuilding. Bad credit doesn’t matter much when you die, but it does make your years of life more difficult.

Discussing your mother’s death will be scary for both of you. But I think addressing the worst-case scenarios will reassure you. So talk about all the scenarios, even if they are uncomfortable. It will free you both to enjoy what I hope will be many years to come.

Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your tricky money questions to [email protected].

This was originally published on The Penny Hoarder, which helps millions of readers around the world earn and save money by sharing unique job opportunities, personal stories, giveaways and more. The Inc. 5000 ranked The Penny Hoarder as the fastest growing private media company in the United States in 2017.

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