Many of our readers in Washington know that any given estate plan typically addresses how assets are passed on to others after the planner’s death. But, an estate plan can – and should – do so much more. Debt, for example, can be a crucially important part of an estate plan.
For starters, our readers and those who are getting into the estate planning process should know that if a person dies with outstanding debt, those debts will typically be paid off from the assets of the deceased person’s estate. Having a plan for those debts can save your heirs and beneficiaries quite a bit of time and money. So, will your estate plan address debt? How?
Addressing debt in an estate plan
A recent news article discussed a few ideas for how debt can be addressed in an estate plan, and those ideas might work for you. One option might be to buy a life insurance policy that pays out directly to your estate or estate trust. That way, your estate gets an infusion of cash that can be applied to outstanding debt. “Secured” debts – debts that are held with collateral – might be passed on along with asset in question. For example, real property that is subject to debt, like a mortgage, might be passed on to another person who assumes ownership of the real property as well as the obligation to pay off the existing secured debt.
Your family and financial situation is unique and, as a result, should be accurately reflected in your estate plan. Be sure to get the best information about your own circumstances before you get started on the estate planning process.