Okay, I'm back. You asked:
She only retired from her full time job in March (thus the new pension, her wages in prior years were obviously higher), but I always thought that she would not qualify for reduced payments with Sallie Mae with $4200/mo income (although her loans kick out of deferment this month while she is testing [and failing her comps] to get into the dissertation phase. Her monthly payment will be $1500...she never thought it through about how she would ever pay this amount. She's incurred $200k in student loans through ARGOSY and while I'm furious they would encourage her to keep incurring debt at her age, I guess they can't discriminate either. She thinks taking comps means the loans go back into deferment despite us telling her 100x only if she passes and is accepted into dissertation phase. Honestly, she is not going to pass. The upshot to the $1500 pay means less to the IRS. This is just to color in my take away from your initial response:
But if I'm reading you right...ethical problems aside...she could in theory not communicate anymore with the IRS or Sallie Mae once she defaults, and no one will come after her if she has nothing to take? Her credit will be destroyed, the dissolution of domestic partnership will not matter if she's saddled with Mary's debt upon Mary's death (BUT ONLY IF WE HAVE HER DECLARED INCOMPETENT, is that right?), but she can just go on living life, and so long as my husband did not sign the fraud affidavit, and Sallie Mae determines by whatever standard that MIL defrauded them instead of Mary because of the cash given to Mary after the fact, then my husband is not liable for her errors, omissions, anything after the POA was triggered, is that right?
A: I regret that I must revise my original answer. I had an image from your first question that MIL was a mentally frail elder woman living off of Social Security and being taken advantage of by her domestic partner.
Your information now suggests that your MIL not having serious mental health or financial challenges, but is, instead, someone who simply operates on impulse when it comes to money issues, and consequently, MIL is in "deep doodoo."
Can/will Sallie Mae, assuming she defaults, garnish her pension? If she dies before the pension benefit is exhausted, my husband is the beneficiary: is he legally obligated to settle her debts with it? The benefit is not listed in her trust...in fact, she has not vested any assets to it yet...another thing she promised to do and never did.
A:Sallie Mae can levy wages (15% after tax), seize tax refunds, and administratively offset Social Security payments (15%). SLM would have to obtain a court order to seize private pension benefits, but it could do so.
Can the IRS garnish her pension? Think they would over $11k?
A: The IRS has nearly unlimited levy authority. IRA generally won't take more than 15%, of a person's income.
MIL will go suicidal if we try to declare her incompetent. She would definitely lose the ability to teach. We want her to stop working completely, but feel like we can't force it without strong arming her. She lives on her own, has $2200 in monthly living expenses between rent, meds, food, car payment....she always spends more...she had $900 to throw around, but she's depleted what little savings she had over visiting Mary in NY for a month. We are requiring that she to take a driving test this month....maybe we would end up selling her car but not before the semester is over.
But our thought was that when the "other shoe" finally dropped and she couldn't live alone, she'd move in with us...we really don't want to put her through the nursing home system. She can't afford assisted living, and doesn't really need it right now...she can live on her own, she just can't handle money anymore. We're in the "grey" area. She's also a compulsive liar, so I'm afraid a competence hearing would be gut wrenching. Do you still suggest going to adult services knowing her current ability to live alone?
A: No. What you are describing is a woman who is just "living large," and who does not know how to manage money.
I will still talk to Adult Services to affirm our position and options at your suggestion, but I kind of got the sense from your initial reply that other than her not agreeing to live with us when we feel she's ready, she really can ignore everything else, including the debt, let her credit be ruined, and live what little life she has left. Am I reading you right?
A: My message has radically changed, because my impression is entirely different now. Your MIL needs a wakeup call. Someone needs to explain that 2 + 2 = 4, not 200,000. Since she has income, the IRS will want installment payments. IRS general rule is based on how much it believes it can collect over the next 60 months after you make an offer in compromise. The IRS website has an OIC calculator. Try it and see if IRS will accept an OIC. It probably won't, but you can run the numbers and see. Otherwise, your MIL will have to do an installment plan.
The only thing left over would be to see what Sallie Mae does about the fraud affidavit. Do you think they would do more than just reaffirm the debt that she won't pay on regardless? Will they try to prosecute? Bottom line: do we need to see her this week and said you should have never given Mary that $900...now Sallie Mae is going to call you the fraudster, and the only way to get you out of trouble is to declare you incompetent?
A: MIL may want to talk to a bankruptcy attorney with experience obtaining discharges for student loans. It's not likely that she will ever be able to repay $200,000 in loans at age 78, so maybe she can get an undue hardship discharge. That would really solve her problems -- but, it's a very difficult type of discharge to obtain, so you need a lawyer who has experience obtaining a student loan discharge.
Yes, this last question is the biggie, and second, who, if anyone, can garnish her pension?
A: IRS. Sallie Mae, also, if it wants to go through the litigation hoops. I doubt that it does, because it's expensive.
Hope this helps.