Dealing with debts through estate planning
On behalf of Scaringi Law posted in Estate Planning on Friday, October 21, 2016.
These days, most Pennsylvania residents will die with some sort of debt. Whether provisions for the payment of the debt are included in estate planning could depend on the type of debt. Fortunately, surviving family members are not often considered to be legally responsible for a decedent's debts.
An estate is responsible for paying any outstanding debts that a decedent had at the time of death. Without proper planning, it could take all of the assets of an estate to satisfy the debts, which would interfere with any planned bequests in an individual's will. However, any joint debts will become the responsibility of the surviving party. For instance, a mortgage loan could become the responsibility of the surviving joint owner of the home. It will then be up to that person to decide whether to continue to make payments on the mortgage loan or sell the home to pay the debt.
Estate planning offers ways to diminish the impact that debts could have on heirs and beneficiaries. Proceeds from life insurance policies go directly to beneficiaries without passing through probate. Additionally, the person receiving the funds is not required to use them to pay the decedent's debts. Any assets that are placed into a trust are also not subject to probate, and are, therefore, not subject to being used to pay debts.
Estate planning offers a variety of options depending on the circumstances. Pennsylvania residents who are concerned that their debts could diminish the value of their estates should speak with attorneys. After a review of an individual's circumstances, recommendations can be made regarding how to best maximize an estate for surviving loved ones.
Source: FindLaw, "Debts After Death", Accessed on Oct. 16, 2016