If you have significant debt, it is important to consider how this might affect your estate plan. In broad strokes, there is good news and bad news. The good news is that creditors are generally not allowed to pursue payment for debts from family members of deceased debtors, except for a spouse in some cases. The bad news is that without a proper plan to prevent it, your debts may eat up your estate before you can pass it on to your heirs.
When a person passes away while carrying debt, family members and beneficiaries often worry that they may somehow be held liable for paying it. Fortunately, this is usually not the case. However, many things the deceased person still owned when he or she passed away could be pursued by a creditor to satisfy the debt. Here’s where trusts can offer legal protection.
Trusts are a legal tool you can use to remove property from your ownership while still maintaining some control over how it is used and who receives it after you’re gone. However, in order to enjoy this protection, you generally have to carefully plan out what to do with the property before placing it in the trust. Once the trust goes into effect, you won’t have as much, if any, ability to alter the plan.
The specifics of how you can protect your property from your creditors depend on the details of your situation. If you think that an estate planning solution to protecting your property is the right choice for you, you can consult with an experienced estate planning attorney who can walk you through the available options and help you choose the plan that fits your needs and protects your rights most thoroughly.
Source: Findlaw, “Paying the Debts of a Deceased Relative: Who Is Responsible?,” accessed July 07, 2017
