Paying Off The Debts You Owe After Passing

If you pass away, while owing debts, those debts will persist. This means that they must be dealt with, even if you are no longer. But, even though this is true, the situation is a little more complex than that.

Going over what can happen to your debts in the event that you pass away, and speaking with an estate planning lawyer, will make it easier for you to ensure that your estate planning wishes are satisfied.

What Happens To Your Debt After You Pass Away? 

The answer to this question is that your debt will persist. And, instead of you paying off these debts, your estate must pay them.

Just as an example, if you owe $10,000, then items within your estate may be liquidated, throughout the probate process, in order to satisfy each one of the debts connected to that sum.

On the other hand, if you had a family member who cosigned a loan connected to this debt, or your living spouse is legally obligated to pay them, then these debts may not be paid off through probate.

Can Your Estate Avoid Paying Off The Debts That Are Owed? 

To answer the question outlined above, “Yes, your estate can avoid paying off the debts that are owed, as long as certain conditions are met.”

The first condition that can be met is as follows: if the debtor attempts to seek payment two years – or more – after you pass away, they are not entitled to any form of repayment.

Outside of that condition, there is one more that, if present, can help your estate protect itself from creditors: you can develop an irrevocable trust that transfers your assets to another person.

How Does Developing An Irrevocable Trust Protect Your Assets From Creditors? 

Just as the name suggests, an “irrevocable trust” is a trust that cannot be revoked. This means that, if you set up a trust of this sort, you cannot revoke the trust. The assets within this trust will, in a sense, no longer be yours.

If you develop an irrevocable trust, you can put all of your assets within this trust. And, when you pass away, you can set it up so that these assets will automatically go to your chosen beneficiaries.

Developing an irrevocable trust allows you to bypass probate. This will save your beneficiaries a great deal of time and money. But, it will also prevent your creditors from draining your estate, in order to satisfy the debts you owe.

The reason for the above is as follows: every asset you put into an irrevocable trust is no longer yours, meaning that your creditors will not have a legal claim over those assets.

Even though the above is true, developing an irrevocable trust is very difficult. And, as such, if you wish to develop one in order to protect your estate from creditors, you must work with a lawyer.

Speak With A Florida Estate Planning Lawyer Today 

If you would like to develop an estate plan that protects your assets from creditors, ensuring that your beneficiaries receive what you wish to give them, working with a lawyer is the best choice you can make.

Speak with a Florida estate planning lawyer at Millhorn Elder Law Planning Group today and we will go over your estate planning wishes, allowing you to develop an estate plan that aligns with your needs/goals.

Sources:

leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0733/Sections/0733.710.html

law.cornell.edu/wex/irrevocable_trust