How is My Debt Dealt with When I Pass Away?

We are all eventually going to pass away at some point in time.  While we would all love to avoid it for as long as possible, we should be prepared for it in more ways than one.  The first thing that you are going to want to do is create an estate plan and establish a will that lists who oversees your estate.  This is the person that you trust the most to follow your wishes after you pass away and is essential during the estate planning process.

When the time comes, your executor, the person you put in charge of your final wishes, will take care of your estate.  They will use any money that you had left to pay off your debts and if there is any debt left, they can also sell your property or other items to cover it all.  That is all completed before heirs receive the money that you left to them, so there is a chance that they may not receive anything, depending on how much debt you had.

If you do not have enough money to pay off all your debts, your spouse or co-signers on the loans are going to be responsible for paying that debt off.  This can include your mortgage and home equity loans, plus credit cards.  If your executor does not pay off your car loan, your vehicle can be repossessed.  Debt collectors are going to do all that they can to collect on your debts, but legally they are not supposed to lie or mislead a person into thinking that they are responsible for repaying that debt.

If you are currently in debt and want to ensure that your heirs receive some money from you when you die, you will want to purchase a term life insurance policy.  The money from those policies are protected from creditors but can be used by a spouse or another person who is responsible for paying off your debts once you pass away.  It is important to keep your beneficiaries up to date on your life insurance policies though, because if they are no longer living, the money will automatically go into your estate to be used to pay off your debts.

Oftentimes, creditors cannot take any money from your retirement accounts either, which means that the beneficiaries that you have on those will receive that money as well.  Depending on how old they are, they may be able to start withdrawing that money to live or they can keep it as a retirement plan to use when they get of retirement age.

The last thing that your family needs is to be hassled by creditors when you pass away, but if you take the proper precautions ahead of time by creating an estate plan, the entire process will be quite simple for everyone.

Learn more about attorney Sean J. Nichols and the legal services he provides for clients including: estate planning, elder law issues, Medicaid planning, elder care, probate law, guardianships, and power of attorney (POA) at www.seanjnichols.com.  To contact the offices of Sean J Nichols, call 734.386.0224 today.