As our economy continues to suffer as a result of the coronavirus pandemic, millions of Americans are experiencing severe loss of income as well as mounting debt. For Baby Boomers and older Americans who have planned and saved for retirement, this was far from expected. Instead of leaving their children with large assets, it’s likely that many older Americans will leave their children and other heirs with bills when they pass. Does this mean that younger generations will be stuck with even more debt? Luckily, that’s probably not the case.
The last thing that you want to concern yourself with when mourning the loss of a parent or close loved one and tying up loose ends is to have to worry about how you’re going to be able to pay for any debts they did not pay off.
Fortunately, although creditors can chase after assets of the estate in order to satisfy any outstanding debt, they cannot come after you individually. Even if a collection agency comes after you to obtain a payment, you are not responsible for making one.
However, this can still greatly impact you, as assets in the estate may have to be sold to cover any existing debts. This means that you may not inherit what you were intended to.
What Happens to Unsecured Debts?
When someone passes with existing unsecured debts, such as credit cards, personal loans, and/or medical bills, they commonly go unpaid or are settled for little to nothing after their death. However, if you have co-signed one of these loans, you will then become the full owner of this debt and will be responsible for paying it off yourself.
What Happens to Secured Debts?
Secured debts differ from unsecured debts in that they must be paid off or else the asset can be repossessed. This would include things such as home mortgages and car loan payments. For this reason, it’s in your best interest to make sure that your parents’ payments for any secured debts have been kept up to date so that you can maintain their equity in the asset until it is sold or transferred.
Understanding exactly what is included in your parents’ estate is extremely important because estate administrators and estate executors are tasked with locating and identifying all assets and debts of the deceased in order to let creditors and financial institutions know of their passing. Having the full picture also allows you to understand what should be paid for first – what takes priority.
Heritage Legal, PC Helps Those in California to with Their Comprehensive Estate Planning Needs
To ensure that you and your loved ones are protected when you pass and that your estate assets – and not your debts – go to the individuals you desire, it is wise to consult with a knowledgeable and experienced California estate planning attorney. They can work to ensure that your wishes will be carried out in the manner in which you desire.
At Heritage Legal, PC, we understand the importance of protecting the very things – and people – that you care about the most. We can help you to establish a comprehensive estate plan that meets your needs and the needs of your family. To learn more or to schedule a free consultation, contact us today!