HOW DOES ESTATE PLANNING INFLUENCE DEBT INHERITANCE?

It's fairly common for an individual to amass some amount of debt during the course of his or her life. If a person dies without creating an effective estate plan, however, debt could reduce or eliminate his or her family's inheritance. In fact, his or her loved ones may even be left bearing the burden. 

Debt can accumulate in many different ways. Consider the following:

  • A decedent may have acquired a great deal of debt from expensive medical treatments or end-of-life care that wasn't covered by his or her insurance. If this is the case, the balances may need to be paid using assets left behind in the decedent's estate.
  • If the debt in question came from credit card bills, the balances are first paid using the decedent's assets. However, if another individual has cosigned on a credit card, lease or loan, then the living cosigner becomes responsible for paying off the debt. If the cosigner defaults on this debt, creditors are then allowed to target the decedent's remaining estate.
  • Another form of debt can come from unpaid taxes. Certain assets, such as bank accounts, Individual Retirement Accounts (IRAs) and real property are often affected by tax debt. Estate executors may be held liable for these unpaid taxes.

In New Jersey, debts left behind by a decedent may be settled through the probate process. However, issues with debt inheritance may be minimized or even avoided altogether by creating an effective estate plan with help from an experienced legal professional. Consult an attorney to learn more about your options.

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Morristown, NJ 07960

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