One of the primary reasons why you decided to create an estate plan is likely because you want to have the final say over what happens to your property in the future. It is difficult to predict what will happen, but you can take certain steps that will allow you to decide what happens to your property. However, if you owe a significant amount of debt when you pass away, this may also impact your estate planning goals.
It is helpful to understand what will happen with your debt after your passing, as well as how you can make choices that will allow you to accomplish your objectives. This will allow you to implement certain strategies in your plan that will be effective for you and your loved ones. Dealing with debts and claims on an estate is an essential part of the estate planning process.
Effective strategies for you and your loved ones
The ideal way to address your debt in your estate plan depends on the details of the individual situation. The executor, which is the person charged with overseeing the administration of the estate, will have to address remaining debt before distributing any assets. He or she will begin with an inventory of all remaining balances and determine the validity of all outstanding claims on the estate. The executor is also the individual responsible for fulfilling all payment obligations.
The specific way that the court will handle your debt will depend on the type of debts you owe, whether the estate is solvent and if you have a will. It is critical that you create your will with your potential liabilities in mind as this can help you strategize property and ensure that your heirs end up with specific assets. In many cases, administrative fees, medical bills and funeral costs are some of the first debts paid during estate administration.
Creating your plan
There is no single estate plan that will work well for everyone. You will benefit from speaking with an experienced professional regarding the ways you can create a plan uniquely suited to your needs, your objectives for the future and other details. Like your assets, your debt should also be an important consideration when developing your overall estate planning strategy.