If you’re making an estate plan, you probably started by considering your assets. They need to be passed down to your beneficiaries, moving wealth to the next generation. This may have been the bulk of your focus when writing a will and using other estate planning documents.
It’s important to note that your debts also have to be paid after you pass away. This is done by the estate administrator. They may have to pay off final credit card bills, utility bills, property taxes, income taxes, funeral costs and much more. The estate executor does this, using funds from the estate to pay off the debt.
Can you plan for this in advance?
Yes, it is possible to plan for this in advance, and it may be very beneficial to your family. One thing you can do is to pay off debts before passing away. This doesn’t work in the case of an unexpected passing, of course, but that may not apply in your situation. As you grow older, or if you receive a serious medical diagnosis, it may be wise to start paying off some of your debts so that the estate administrator doesn’t have to handle it at all.
For other costs that you can’t fully eliminate, like property taxes, it may be best simply to set money aside. Maybe you want to establish a trust fund or set up a bank account to hold the money that will be necessary. This makes it easier for the administrator to know what funds to use to pay off debts and which assets to distribute between beneficiaries.
The financial side of estate planning can be highly complex. As you work your way through this process, carefully look into all of the legal options at your disposal.