Your loved ones may be expecting to inherit certain items from your estate. Perhaps you have antiques, real estate or other valuables that you hope to leave to your children to ease their burdens after you are gone. However, without careful planning, you may be leaving them your debt as well.
The fact is that over 70% of adults leave behind thousands in debt when they die. Those who do not have a mortgage may still carry nearly $13,000 in debt, and a mortgage can hike that amount to more than $61,000. Even if your debt is manageable now, you may want to take steps to prepare for your passing to avoid leaving that burden for your loved ones to carry.
Who will pay your debts?
After you pass away, your estate executor or personal representative will handle your creditors. The assets in your estate will pay for many of your outstanding debts. This may mean your executor will have to liquidate some assets to pay what you owe. For secured debts, such as a vehicle or your home, your executor may simply allow the creditor to repossess the asset. Another alternative is to allow the heirs to refinance or take over the payments of any assets they may want to keep.
Student loan debt may disappear after your death, but your credit card companies may demand payment from your estate. Additionally, if you have a co-signer on any loans or a loved one is a joint cardholder, the lenders may demand payment in full of that person at the time of your death. This can be an overwhelming experience, and you can take steps to avoid this, including:
- Keep your finances in good order, and make sure your loved ones can access your passwords and other information when needed.
- Understand the terms of any loans or credit accounts.
- Keep your balances low and pay off as many debts as possible.
- Purchase life insurance specifically to help your heirs pay off your debt.
- Seek advice from an attorney.
Your Texas legal advisor may be able to help you prepare your estate to minimize the debt burden your heirs will carry. While you may not want to leave your family saddled with your debts, neither do you want your creditors to claim the inheritance you had hoped to leave for your loved ones. Taking the time to organize your finances and consult with an estate planning attorney can be a tremendous gift for those you leave behind.