Once the executor provides notice of the death to creditors, those with debts owed by the estate must submit a claim. If the debts are determined to be valid, they will be paid from the estate by the executor before any other distributions can be made. This would include bills and funeral expenses. California requires creditors to submit their claims within 4 months of the appointment of the executor. So, many clients wonder what role their debts will plan in their overall estate plan. Let our Los Alamitos estate planning lawyers help you be prepared.
An appropriate estate plan can address debt issues
Estate planning is a complicated process that requires great attention to detail. However, with a comprehensive estate planning that includes more than just a Last Will and Testament or trust, you can be prepared for any impact your debts may have on your estate. In order to understand that impact, let our Los Alamitos estate planning lawyers explain the possible effects and how to plan for them.
Avoid incurring as much debt as possible
It may seem simple, but the best way to avoid a negative impact on your estate is to avoid incurring as much debt as you can during your lifetime. But the reality is, it is nearly impossible to avoid debt completely. According to some reports, nearly 73 percent of all Americans have outstanding debt at the time of their death, usually averaging about $62,000 per person. Consequently, it is important to appreciate how much debt you have as well as understand how to manage it properly, so you can minimize the potential financial burden your debt will ultimately cost your heirs and beneficiaries. Our Los Alamitos estate planning lawyers can help.
Recognizing the different types of debt
First, it is important to recognize that there are different categories of debt. You should understand the differences between these categories as well as how those different types could potentially impact your estate. At that point, our Los Alamitos estate planning lawyers can help you understand how to manage them.
Secured debts vs unsecured debts
Debts are either secured or unsecured. Secured debt has been guaranteed by some form of collateral. For example, your car and your house loans are considered secured debts because the house and the car serve as the collateral. Secured debts typically come with lower interest rates because, if you default on the loan, the lender is legally able to recover the property.
Unsecured debt, on the other hand, does not involve collateral, so the lender would need to go to court in order to recover a judgment against you. That means interest rates on unsecured debt are often much higher. The most common type of unsecured debt is credit card debt.
Don’t overlook your student loan debt
Many Americans have student loan debt, and depending on the type of school loan, it will be handled differently upon your death. The good news is, federal student loan debt is typically canceled upon your death, regardless of the amount of assets that remain in your estate. Conversely, private student loans very often come with a provision that allows the lender to pursue repayment of the loan through your estate.
Let our Los Alamitos estate planning lawyers help you plan for debt
Generally speaking, debt belongs to the deceased and his or her estate. Essentially, that means your estate will likely be responsible for settling any debt that remains after your death. So, the amount of that debt can reduce the amount of assets that will ultimately be distributed to your loved ones after your death. That impact could be significant. Using estate planning tools and asset protection strategies can help to reduce that impact be removing various assets from your estate.
Each estate plan is unique to the client
Although the tools generally used in estate planning may be the same for most people, the planning process will be unique to each client and their estate. Working with Los Alamitos estate planning lawyers can make it easier to address your individual needs, including planning to reduce the impact of your debt. If you keep an eye on your credit report and manage your debt, you can take proactive steps to reduce or eliminate the impact your debt will have on your estate.
If you have questions regarding handling debts, or any other estate planning issues, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696. #estateplanning, #schomerlawgroup, #estatedebts