You can see it now. Your children stood around your grave, half an onion in their pockets so they can shed a few mock tears for you, waiting to throw the mud on your coffin and get their hands on your estate. However, you have a surprise for them. Rather than inheriting what they hoped, you leave them with a pile of debt. They have to sell the family home to pay your dues, and if they are lucky, walk away with a few thousand dollars apiece.
You wake sweating from your strange dream and wonder what it meant. After all, your children are not like that at all, and you want to do everything you can to help them when you have gone. Maybe it was a reminder to revisit your estate plan and tidy up your finances while you still can. Sadly, many parents inadvertently leave their children to pick up the pieces and pay off their debts because they do not take the time to create an adequate estate plan.
Everyone knows that assets pass on, but many forget that debts do not go away when you die. Some debts need to be paid from your estate before your children can inherit what is left. These are some debts you may have:
- Mortgages and home equity loans: Benefits can either take over the payments or pay off the loans in a lump sum, which may require selling the house to do so.
- Car loans: If the beneficiaries do not want the lender to repossess the car, they must complete the payments.
- Credit card loans: These may be payable from the estate but cannot pass to a beneficiary unless they were a co-signer of the card.
If you can clear all your debts before you die, you make things easier for your children. If not, smart estate planning can help you protect your assets and avoid creditors bothering your children.