Planning your estate is something that many put off for years, as they consider it to be a task completed by senior citizens. However, taking the time to decide what you would like to happen to your assets and wealth after you pass is crucial to ensuring peace of mind. However, if you have debt that seemingly won’t go away, you may be worried that your loved ones will inherit it. Keep reading to learn what happens to debt after you pass away and how a Washtenaw County estate planning attorney can help you prepare.
Who is Responsible for My Debt?
After you pass, your debt, unfortunately, does not go away. Instead, your estate is responsible for paying your debt. This means any wealth or assets accumulated will go towards paying off your debt, before being distributed among your beneficiaries according to your will.
However, if your loved one, such as a spouse, is a cosigner of a loan or an authorized user on a joint credit card, they can be responsible for paying those obligations.
This can provide peace of mind knowing that unless they were on a loan or credit card account, your loved one is not responsible for paying your debt out of pocket. Instead, your estate will cover the outstanding payments.
What if My Estate Does Not Cover the Debt?
If you have a significant amount of debt and very few assets, your estate may not cover the cost of what you owe. In this case, your estate would be classified as insolvent, meaning creditors can only collect a little of what they are owed. Similarly, your beneficiaries would likely receive no inheritance from your estate.
However, there are a few assets that cannot be used for collection after your death, including life insurance policies and the funds in your retirement account. These are protected and can be distributed to your beneficiaries after your death.
Do I Need a Lawyer?
If you’re worried about ensuring your family and loved ones are taken care of after you pass, ensuring you retain the counsel of an estate planning attorney is essential. They can help ensure your will is valid and answer any questions you have.
Similarly, after you pass, many collectors will target your family in hopes of getting them to pay your debt. This is often a trick to try to get your debt settled, as many family members are unaware they do not inherit your debt. Ensuring your lawyer is available to help them determine the validity of claims from collectors is essential to keeping them safe from predatory collection agencies.
If you’re concerned about your financial future, contacting Collis, Griffor & Hendra can help provide peace of mind. Our competent legal team will work will you to get your assets in order.