As a possible recession looms over the American economy, financial planners often tout the same advice: reduce debts and cut spending. That advice resonates with estate planning attorneys too. The simple reason is that reducing debts can impact a decedent’s estate administration and ultimately what heirs may inherit.
With estate planning attorneys, clients often inquire whether a Trust or a Will, which would pass assets through probate, is more beneficial. The legal discussion centers on the person’s assets, their goals for their estate and heirs, and also personal debt. With a Will or Trust, both require creditors to be paid before beneficiaries receive anything. Both instruments can be drafted with specific instructions for certain assets.
One advantage of probating a Will is that a Personal Representative is required to notify creditors to bring claims against the estate for outstanding debt within a certain period of time; creditors who do not file claims within that time frame are out of luck. Personal Representatives have significant responsibility to follow the law in handling estate assets and paying valid claims properly and in the correct order. Ultimately a solvent estate can pay debts and expenses, often leaving assets for heirs to inherit. However, an insolvent estate may not have sufficient assets to pay off all of the debts, leaving nothing for the heirs to inherit.
How to Minimize Debts to Simplify an Estate:
Emma Dill - Dec 4, 2023
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