My Husband is Terminally Ill With Cancer. – Lindadeath

“Dear Steve,

My husband is terminally ill with cancer. Prior to becoming ill he owned a small business. He was the sole provider and I cared for the children and home. Due to his illness, the business closed in 2007 and he is on disability since 2009. We lost our home, some other real estate investments and have other medical debts as our self employment insurance has a very high deductible. There are no assets anymore to speak of.

My husband would like to protect me from creditors when he is gone, if possible, since I am older and don’t have marketable skills. There is a life insurance policy, but we assume they can come after that too. It was suggested we change the beneficiary of the life insurance from me to a trust.. Is this a solution, or is there any other way to protect life insurance from being gobbled by creditors?

Linda”

Dear Linda,

I am so sorry to hear that you are facing this experience. I wish I had a wand to make it better for you.

It does not sound like you have much left in the way of assets. If that’s the case then you might want to consider filing bankruptcy jointly before he passes to close the door on all the debt. It is my understanding that the life insurance benefit may not be touched by creditors but this is the kind of thing you need to make certain of. it can get complicated and it’s a really important task to get right.

After your bankruptcy, any debts in his name alone will not be your responsibility after he passes. Creditors will only be able to look at his surviving estate for payment and it seems the life insurance is your benefit and not part of his estate.

I would suggest that you meet first with a bankruptcy attorney and make sure the life insurance proceeds would be protected and if not then meet with an estate attorney to put together a solution to address the situation.

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