Debts can be a huge problem for both the dead and the living. While many assume that dying could mean the end of debts, estate planning experts warn testators that not all debts disappear upon death. In fact, many may come back to cause serious problems to heirs.
With the relative ease of getting loans and credit cards in the country, it is no surprise that many will accumulate massive debts by the time they reach their twilight years. With a decline in asset valuation in recent years, experts worry that debts can wipe out assets if proper action is not taken. Experts agree on five key steps to consider when planning an estate strategy.
Aside from simply paying off debts early, being honest to heirs is simple a key strategy. By sharing the complete financial picture to successors it will help everyone legally prepare for any creditors.
With the relative ease of getting loans and credit cards in the country, it is no surprise that many will accumulate massive debts by the time they reach their twilight years. With a decline in asset valuation in recent years, experts worry that debts can wipe out assets if proper action is not taken. Experts agree on five key steps to consider when planning an estate strategy.
Aside from simply paying off debts early, being honest to heirs is simple a key strategy. By sharing the complete financial picture to successors it will help everyone legally prepare for any creditors.
Insolvency occurs when debts are greater than assets and while creditors can’t go after heirs as long as debts are named under an individual’s estate, they can still ask the court to a special order that forces an executor to sell off assets to cover for any liabilities but a good strategy can protect valuable assets from such actions.
Life insurance can also be a tool to pay off debts especially if heirs would rather keep certain assets since creditors cannot touch it once passed on to a spouse and heirs. Testators should also open loan protection insurance similar to a mortgages life insurance. These declining-term policies pay off specific loans in case of death or incapacity despite costing more than the regular life insurance.
Finally and perhaps most importantly, by naming a person rather than an estate as beneficiary, you are keeping assets away from probate and directly to heirs. This is a key strategy because creditors can get their hands to any assets once it goes through probate court. By not naming an estate as beneficiary, assets could pass on directly to heirs and creditors can’t dip their hands into it.
Insolvency occurs when debts are greater than assets and while creditors can’t go after heirs as long as debts are named under an individual’s estate, they can still ask the court to a special order that forces an executor to sell off assets to cover for any liabilities but a good strategy can protect valuable assets from such actions.
As such, a wise estate planning strategy involves protecting assets to maximize wealth being passed on.
About The Author
Victor Dela Casa is
a Filipino-Canadian who spent over a decade working as a business
professional in Canada. Worked in IT, finance, marketing, international
trade, public service, project management and the maritime industry.
Degree in Economics from the University of the Philippines and Honours
Diploma from Eastern College. Currently based in the Philippines and
working as a professional writer for a multi-national business processes
firm.
| Share This Article |
|---|
Categories:
Business / Money,
Legal,
My Originals
