Establishing a Reserve Fund if You Plan to Die With Debts

Many individuals plan to die with various debts. Often, these individuals are wealthy despite having outstanding debts. There is “good debt” that can help you build equity, fund business ventures, and much more. If you plan to pass away before paying off this debt, you might want to set aside money to pay for these debts. How exactly do you accomplish this goal, and can an experienced estate planning lawyer in Tampa help?

Why Should I Set Aside Money for My Debts?

 If you plan to die with debts, you might be content in knowing that your personal representative will simply sell some of your assets to resolve these debts. But is this truly the right decision? After your passing, your personal representative may sell assets that you would rather keep in the family. These might include the family home, vacation properties, and other real estate holdings. You might have a prized vehicle or antique that you want to keep in the family.

If any of this sounds familiar, consider setting aside a designated fund or account to cover your unresolved debt. Not only will this prevent your assets from being liquidated in order to cover your debts, but it also makes life easier for your beneficiaries and your personal representative. A less extensive probate process with fewer steps may also reduce legal fees for your loved ones.

What Is an Estate Account? 

An estate account is something that your personal representative can set up to cover your unresolved debts. There are very specific rules associated with these accounts, and your personal representative can only use the funds to cover certain debts. However, you cannot set up an estate account yourself – and your personal representative takes this step after your passing.

Consider Resolving Your Debts Before You Pass 

For many individuals, it might not make sense to resolve debts before death. For example, an individual might owe hundreds of thousands of dollars in mortgage debt. They might also have a business that operates “in the red” periodically throughout the year, and resolving these liabilities could be difficult or unprofitable.

On the other hand, individuals should consider paying off their debts before their passing if at all possible. While it is true that your personal representative will resolve these debts on your behalf, your family might benefit more from inheriting a relatively debt-free estate. Less debt means fewer steps for your personal representative, fewer transactions, and lower overall legal fees for your loved ones.

Can a Seminole Estate Planning Lawyer Help With Debt Issues? 

If you need to address debt while building your estate plan in New Port Richey, consider working with an experienced lawyer. Each financial situation is different, and various types of debt may require different action plans. Continue this dialogue with Knudsen Law – and get started on a plan today with our experienced estate planning attorneys.

Sources: 

floridabar.org/public/consumer/pamphlet026/

help.flcourts.gov/Other-Resources/Probate