There are a lot of personal factors that you have to consider when planning your estate. For example, which family members will receive your biggest assets? Who will manage your affairs if you become incapacitated and after you die?
With all the focus on end-of-life care and asset distribution, people can overlook another significant concern, which is what happens to their personal debt when they die. Do you need to specifically plan for your debts when planning your state?
Your debts won’t just disappear when you die
When you die, you might have a mortgage, a car loan, student loans, credit card debts and medical debts. Although you are no longer alive for creditors to take legal action against you, they can bring a claim against your estate.
If they do, they can potentially claim every last cent that you intended to leave behind for your loved ones, possibly even forcing the sale of your home. The average American dies with around $62,000 in debt, and that amount could consume much of their home equity or life insurance payout.
Looking at the total value of your estate can help you determine if you have enough assets to cover that debt when you die. Many people may find that they need to carefully plan ahead to protect their most valuable assets, like their houses or their businesses, from claims by creditors.
Engaging in asset protection planning can be a way to both protect yourself from creditor claims as you age and protect the legacy you want to leave for your loved ones.