Maintaining a professional appearance and household can be very expensive. You may require revolving credits just to cover your cost of living expenses. Whether you have credit cards or take out personal loans, those unsecured debts will require repayment.
Your debt can affect your financial stability as you grow older and have less income. It can also create issues for your loved ones after you die. Estate planning often requires taking an honest look at your financial obligations and planning carefully to address them.
How do debts affect your estate?
When you die, whatever you still owe will become the responsibility of your estate. Your estate includes all of the property in your personal name at the time of your death, and it must fulfill your financial obligations before those assets can transfer to the intended beneficiaries you name in your will.
The representative of your estate will have to notify creditors about the probate proceedings and give them an opportunity to make a claim in probate court. Every debt, no matter how small, will enjoy priority consideration over the beneficiaries of your estate who hope to receive an inheritance.
The representative of your estate will be personally responsible if they fail to properly resolve your obligations before giving your assets to family members and other beneficiaries. If you don’t address your debts in your estate plan, there may not be anything left for your loved ones to inherit at the end of the probate process.
How do you plan to protect your legacy from debt?
Some people will die with so much debt that there isn’t anything of value left to transfer to their children or other loved ones after repaying their creditors. You can help protect your legacy by identifying risks like your unsecured debts, and planning ahead to pay those debts or protect your most valuable property.
Making gifts before you die, transferring property into a trust and changing the official owner of certain property are all strategies that can help minimize the risk of creditors laying waste to your assets. Many people also make a point of carrying enough life insurance to cover their debts. Learning more about the complications that can affect your estate plan can help you achieve your legacy goals.