Estate planning eases debt burden for loved ones
Estate planning is no doubt a task to determine how your cash and other assets are given away after your death. But what about your debts?
As a general rule, any debt in your name only will not pass on to your beneficiaries. However, any assets to which they are entitled might be reduced as your estate is responsible for payment of your debt.
If you don't have a plan, it will make it more difficult to determine how your estate will settle those obligations. This can be an unpleasant and often stressful task.
Roger McEowen, writing for the Iowa State University Center for Agricultural Law and Taxation, raised the example of a man who left three family farms to his son but didn't specify whether the estate should pay off the farm debt.
The estate paid the $240,000 in farmland debt, but that decision prompted a lawsuit: "That meant that the son got the farms debt-free. But one of the other estate beneficiaries sued on the basis that their share of the inheritance had been reduced in an unauthorized manner."
If this man had made it clear before his death how his debts should be settled, this burden wouldn't have been passed along.
Aside from making your intentions clear, it's always a good idea to create an aggressive debt elimination strategy while you're still alive.
To get a better idea of exactly how much debt might be paid out of your estate, use our debt calculator to see how much you actually owe.
The number is often surprising.
Once you have a figure with which to work, you can begin a debt repayment plan that helps eliminate debts before they reach your estate.
By doing so, you can rest assured the assets remaining in your estate will be distributed in the manner you wish without being reduced by unnecessary debt payments.
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