How to Avoid Leaving Debt to Your Family Members in Tampa

Most people want to leave their loved ones’ wealth when they pass away. Sometimes, life has other plans. Despite your best efforts, you might face the very real possibility of passing on debt to your family members instead of wealth. What can you do in this situation? Should you consider various asset protection strategies, possibly with help from a Tampa estate planning attorney?

Your Beneficiaries Will Never Have to Pay Your Debts Out of Their Own Pockets 

First, you should know that your loved ones will never become personally liable for your outstanding debts when you pass away. Instead, the personal representative of the estate must use your remaining assets to cover your debts. Once these assets are exhausted, your creditors cannot turn to your loved ones for more money.

That being said, debts can decrease or eliminate the assets your loved ones stand to inherit. If your debts are higher than your assets when you pass away, your beneficiaries might not inherit anything at all.

Consider the Florida Homestead Exemption 

An obvious asset protection strategy in Florida is the homestead exemption. Although there are many types of homestead exemptions in Florida, the relevant option in this context is the one that falls under the Florida Constitution. This exemption shields your primary residence from most creditor claims. Your creditors cannot force you to sell your homestead in order to pay your debts.

This exemption also passes to your beneficiaries after they inherit your primary residence. In other words, your creditors cannot “intercept” the family home as it passes to your loved ones after your death. They get to benefit from the homestead exemption as well, and this could represent an excellent way to pass on your wealth without forcing your loved ones to pay your debts.

Some take full advantage of this strategy by pouring as much of their wealth as possible into their homestead before passing. For example, you might decide to spend cash on renovating your home and increasing its value. Perhaps you’ll sell your home and purchase a new primary residence that is more expensive, using excess cash to fund the purchase. These strategies can shield as much wealth as possible within your homestead, thereby minimizing debt obligations for your beneficiaries.

Consider an Irrevocable Trust 

Another option is to transfer your assets into an irrevocable trust. A trust of this nature represents a separate legal entity with strong asset protection qualities. Once you transfer your assets to a separate legal entity, your creditors may no longer have the right to pursue those assets. Your beneficiaries can also inherit irrevocable trust assets without going through probate, which is a notable advantage. Furthermore, you can use irrevocable trusts to pay medical bills and help qualify for needs-based programs like Medicaid.

Can a Seminole Estate Planning Lawyer Help Me Avoid Leaving Behind Debt? 

A Seminole estate planning lawyer may be able to help you use various asset protection strategies if you’re worried about leaving debt to your loved ones. While online research may be a positive first step, it cannot replace in-person guidance from a real lawyer. Consider continuing this conversation by contacting Knudsen Law today.

Source:

 consumer.ftc.gov/debts-deceased-relatives