Most people want to create an estate plan to ensure their loved ones receive assets upon their death. However, there is another type of property most people overlook when developing these estate plans. In some cases, the debt you hold will not go away after death.
Research done in 2017 found that 73% of Americans will pass away with some form of debt. The average debt leftover equals over $61,000, and you want to do everything in your power to limit your loved ones’ liability. As you create your estate plan, you want to make sure you are aware of how much debt you owe and how you should set up your estate going forward.
Make a list of all liabilities
Before opening probate, you should develop a list of all liabilities you own. These are the types of statements and bills you want to look out for:
- Lines of credit
- Credit card bills
- Property taxes
- Personal loans
- Utility bills
- Cell phone bills
- Loans against retirement accounts and life insurance policies
Once you have listed everything, you need to divide it into two categories. The first should be liabilities that will continue through probate as these will be administrative expenses. The second should be liabilities that the estate can pay off after opening the probate estate.
Handling mortgages and bills during probate
Once probate opens, the executor or personal representative for the estate will take control of payments made through administrative expenses. Part of this will include determining which debts are still valid and how much the estate actually needs to pay on everything. There are some debts that die with the individual, and these will not require payments going forward.
In the event some of the beneficiaries needed to pay some of the decedent’s bills prior to opening the probate estate, the executor should reimburse these people accordingly. The only exception is if the decedent left behind real estate assuming that individual would take over mortgage payments. In this instance, reimbursement would not be necessary.