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Estate planning with outstanding debt in mind

On Behalf of | Nov 15, 2023 | Estate Planning

Individuals who are creating a legal and financial strategy for the future do so with specific and unique goals in mind. For example, you may want to create your estate plan so that you can be certain that your loved ones will receive assets from your estate after you pass away, or you may want to protect your wealth in order to accomplish something specific with it after you are gone. As you are creating these strategies, you will also benefit from considering your debt.

Most people do have some debt, and it is possible that you could pass away while still owing some money, or you may accumulate debt at the end of your life. Regardless, it is helpful to understand what happens to a person’s debt after he or she passes away. This understanding can help you craft a plan that allows you to look to the future with confidence.

What do you need to know?

Every estate is different, and what happens to debt during the estate administration process depends largely on the type of debt it is and whether the estate is solvent. This means that creditors could have a claim to your assets, even if those assets are for a specific heir. Careful planning is critical to ensure that your property ends up in the right places. The court cannot distribute assets and close the estate until dismissing or resolving all remaining claims against the estate.

The court settles claims against an estate in a specific order if the estate is solvent. Administrative expenses, funeral costs and medical bills are the first priority. Another factor that can impact the payment of outstanding debt is whether there is a will. One of the main benefits of having a will is that you can have a measure of control over what happens to your property, even if you pass away with debt.

Confidence for the future

Regardless of whether you have a significant amount of debt, you will benefit from having experienced guidance as you create your estate plan. This allows you to look to the future with confidence, knowing that you have done everything possible to protect your loved ones and ensure that your assets end up in the right place. An assessment of your estate, your debt and other factors can help you understand what steps are most important.