When you die, your debts don't die with you. If you leave unpaid debts behind, your creditors can go after your estate to get the money they're owed. Here's what you need to know about leaving debt in your Will.
If there isn't enough money in your estate to cover your debts, your creditors may not get paid in full (or at all). In that case, they may decide to write off the debt. But, they may still try to collect the debt from your estate or from your heirs.
Video: What Happens To Your Debts When You Die?
You Should Try to Pay Off Your Debts Before You Die
If you want to make sure your creditors get paid, you should try to pay off your debts before you die. That way, there won't be any unpaid debts left in your estate. Of course, this isn't always possible. If you can't pay off your debts before you die, there are other things you can do to make sure your creditors get paid.
For example, you could put money in a trust specifically for the purpose of paying off your debts. Or, you could name a specific person in your Last Will and Testament who will be responsible for making sure your debts are paid. You should talk to a lawyer to see what options are available to you.
Your Heirs May Be Responsible for Your Debts
In some cases, your heirs may be responsible for your debts. This can happen if they inherit property that is subject to a mortgage or other debt. For example, if you leave your house to your child in your Will, but there is still a mortgage on the house, your child will be responsible for paying off the mortgage.
Your Creditors May Not Be Able to Collect Your Debts
In some cases, your creditors may not be able to collect your debts from your estate. This can happen if the debt is discharged in bankruptcy or if the statute of limitations has expired.
Leaving Instructions in Your Will for Paying Debts
If you're worried about leaving unpaid debts in your estate, you can include instructions in your Will for how to pay them. For example, you could put money in a trust specifically for the purpose of paying off your debts. Or, you could name a specific person in your Will who will be responsible for making sure your debts are paid.
What Happens if You Don't Leave Enough Money to Pay Your Debts?
If there isn't enough money in your estate to cover your debts, your creditors may not get paid in full (or at all). In that case, they may decide to write off the debt. But, they may still try to collect the debt from your estate or from your heirs.
Conclusion
Leaving behind unpaid debts can be a stressful experience for both you and your loved ones. By taking the time to understand your options and plan ahead, you can make the process as smooth and stress-free as possible.
