Debt in Your Estate Plan

One of the goals of estate planning is to ensure a smooth transfer of your assets but what about debt in your estate plan? Debts are also a big part of handling someone’s estate after death. Unfortunately, we’ve seen estates completely wiped out by debts owed by the recently deceased. And worse, sometimes debt can be passed to surviving family members. We always include a discussion about debt in your estate plan to help avoid disasters like these.

Our most important recommendation to clients who owe money is to be transparent. Honest and open communication is needed to avoid unnecessary problems when it is time to execute the estate. Be sure to talk about any outstanding balances that are owed with the appointed trustee and any professionals that are helping with your estate plan. Having a clear understanding of any debts owed and access to financial information upon death can make the process of settling the estate much easier. 

It’s important to remember that debts do not go away when a person dies. However, in most cases, federal student loans and some credit card debt can be discharged after death. If the debt is jointly owned, the surviving individual will still be responsible for the entire debt. You should be sure that the trustee knows the situation of any debt, whether it is solely yours or not. They need to know what should and should not be paid in case they have to deal with collection agencies. 

You can also specify what will happen with debts in your Trust and estate plan. You can specify that debts such as mortgages or car loans, would be paid before the estate distributes or you can specify that the person inheriting the asset will assume the loan. By putting it in your estate plan, you can help remove any issues and ensure that your wishes are fully carried out. 

No one wants to pass on debt to their loved ones, but if you owe debt, careful planning is important. If you have any questions about handling your debt in your estate plan, call our California trust and estates office at 800-244-8814 to schedule a consultation. 

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.