Understand How Your Debt Will Transfer When at Your Death

When a person passes away, their debts don't simply vanish. Instead, these debts become part of their estate, which is the total sum of their assets and liabilities. The process of handling these debts and distributing the assets is known as probate.

Secured debts, such as mortgages and car loans, are tied to specific assets. For example, if you have a mortgage on your home, the lender has a lien on the property until the mortgage is paid off. Similarly, if you have a car loan, the lender has a claim on the vehicle until the loan is satisfied.

In the probate process, the executor or personal representative of the deceased person's estate is responsible for identifying and managing the assets and liabilities. They must notify creditors of the person's death and may need to sell assets to pay off outstanding debts.

If there aren't enough liquid assets in the estate to cover the debts, the executor may need to sell off assets, including the home or car, to satisfy the creditors. This can be distressing for family members, especially if they were relying on those assets for financial stability.

A revocable living trust offers an alternative to the probate process. With a trust, you can transfer ownership of your assets into the trust during your lifetime. Upon your death, the assets held in the trust pass directly to your beneficiaries according to the terms you've established, without having to go through probate.

By using a revocable living trust, you can potentially expedite the distribution of assets to your loved ones, bypassing the delays and expenses associated with probate. This can help alleviate financial strain on your family and ensure that your assets are distributed according to your wishes.

Do you have specific questions about your situation? Schedule your free, no-obligation, no-expectation, no surprise bill EVER, appointment now.