Estate planning requires a holistic approach to the process. Individuals need to look carefully at their unique circumstances, including their resources and their closest relationships. Debts are also an important consideration when establishing an estate plan.
A young professional creating an estate plan that will provide for their spouse and children should not overlook how hard it can be to make mortgage payments while simultaneously raising children alone. Their student loans could also be cause for concern.
How do people address their debts in an estate plan?
By creating a list of obligations
Keeping accurate inventories of financial accounts can help prevent estate administration oversights. The testator establishing the estate plan can also evaluate their options for handling their debts once they understand what financial obligations their estate has to cover.
By leaving clear instructions
Some people set aside specific resources to cover their financial obligations. Others take out life insurance policies that can cover all of their debts, including the balance on their mortgage or student loans.
Leaving clear instructions for a personal representative (executor) regarding how to pay specific financial obligations can help prevent scenarios in which debts go unpaid and cause probate complications. In some cases, testators may need to take an additional step by establishing an estate plan that protects some of their resources in the event of creditor claims during the probate process.
Reviewing financial circumstances can help a testator properly address their debts in their estate plan. Those who want to have a positive impact on others need to ensure that their debts don’t consume the entirety of their legacy.
