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Use Your Will or Trust to Dictate How to Pay your Debts

by | Sep 25, 2018 | With Your Family in Mind

 The main purpose of a will or trust is to direct where your assets will go after you die, but it can also be used to instruct your heirs on how to pay your debts. If someone dies with outstanding debt, your representative is responsible for making sure those debts are paid. This may require selling assets you would have preferred to leave to specific heirs. There are two types of debt:
Secured debt is debt attached to a piece of property or an asset, such as a car loan or a mortgage.
Unsecured debt is any debt that is not backed by an underlying asset, such as credit card debt or medical bills.
When you leave an asset that has debt attached to it to your heirs, the debt stays with the property. If you believe this would cause a burden to your heirs, you can leave them assets in your documents specifically designated to pay off the debt. If you want to leave certain liquid assets, like a bank account, CD, or stocks to an heir, you should designate in your estate documents what assets you would like your representative to use instead to satisfy debts.
Not everyone needs to spell out how to pay a debt in their estate documents. If your debt is negligible or your entire estate is going to just one or two people, it may not be necessary. Contact your attorney to formulate a plan.
Ms. MacDonald’s practice is limited to Estate Planning, Probate & Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite A-209, Valencia, California. She can be reached at 661-294-6464.
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