Debt is The Only Thing My Kids Will Inherit

Wrong.  

There are some situations where your kids can "inherit" debt, but there are specific requirements, and most people do not find themselves in those situations.  In fact, in those situations they're not inheriting it at all, but instead fulfilling their obligations as a guarantor on the debt.  I know - two sides of the same coin.

The good news is that there are ways to make sure that assets like retirement accounts, life insurance and other investments go to the benefit of your children and loved ones instead of paying off debt when you are relieved of your mortal coil.

First, let's make sure we understand exactly what happens to debt when one dies.  Well, it depends on what kind of debt it is.  Federally guaranteed student loans are forgiven upon the death of the borrower.  Without a well designed estate plan, most everything else is going to go through probate.  This is oversimplified, but you'll get the idea - probate is a lawsuit filed by you after you die, using your own money, for the benefit of your creditors.  

Of course there are exceptions like life insurance benefits and retirement accounts, but to make sure those funds aren't used to pay other debts, you need a plan.

A will is a good place to start, but it's important to remember that a will must go through probate in order to work.  So we're right back at the same problem.  Additionally, the probate process is completely public.  Anyone can go to a courthouse and find out what someone left to their heirs.  

For some the privacy issue may not be that big of a concern, but think about this: "anyone" includes creditors.  Debt collectors can be a tad bit aggressive, and some of them will have absolutely no problem calling up your loved ones after your gone and telling them that their share of your 401(k) has to be handed over to satisfy credit card debt.  It can and does happen.

If you have questions on what does and does not go through probate, or you would like more information on how a Family Legacy Plan can help protect your estate from creditors, contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.