When you are in debt, it can feel like the weight of the world is on your shoulders. As such, you may wonder what will happen to the funds you owe following your passing. Unfortunately, many are unaware of the impact even a little bit of debt can have on how their estate is handled. If this reflects your circumstances, you’ll want to keep reading to discover how these matters are handled and why connecting with Pennsylvania estate planning attorneys is in your best interest.
Will my beneficiaries be responsible for paying my debt?
When you have accumulated debt before your passing, it’s important to understand how it will be handled during the probate process. While many assume that probate is only necessary for those who do not have a will in place, this is not true. Probate is just the process of overseeing the distribution of someone’s estate upon their passing, whether through validating their will or having the state step in to handle the estate if there is no will in place.
Typically, you’ll find that if you pass away with debt, your creditors are entitled to the funds they are owed out of your estate. As such, when you pass, the executor of your estate must submit your death certificate to the probate court and notify all creditors of your passing. Typically, however, before allocating funds to the beneficiaries, the executor must pay off the remaining debts. This includes paying with cash or liquidating property if necessary.
In some instances, certain property is exempt, including life insurance and retirement savings. Additional exemptions will vary based on the state that you are in.
What are my estate planning options?
In general, even if your debts outweigh your assets, your family members will still receive some inheritance, as Pennsylvania allows for the allocation of up to $3,500 per family member residing with you at the time of your passing.
Another option is to create an irrevocable trust fund before your passing. Placing assets in this fund can help protect your property, as creditors cannot access these funds. This is because creating an irrevocable trust removes the property from your control and places it in the trustee’s control. Once created, the trust cannot be altered, as the property no longer belongs to you.
It’s also important to note that your family can utilize funds from the estate to pay for expenses like rent and funeral costs, even before creditors are paid.
As you can see, many considerations must be kept in mind when planning an estate while carrying considerable debt. If this reflects your circumstances, connecting with an experienced attorney is in your best interest. At Friedman Schuman Layser, we understand how important protecting your loved ones is. That’s why we will do everything possible to help you navigate these complicated matters. Connect with us today to learn how we can assist you during these challenging times.
