What If I Leave Debts Behind?

The way debts are handled is highly state dependent.  This advice and answer is only for the state of Arkansas.

First, your children are typically not responsible for your debts.  The cases where they may be responsible are:

1. They cosigned a promissory note with you and promised to pay if you can’t or won’t
2. They signed a contract with a promise to pay if you can’t like a nursing home contract

If you leave debts behind, payment depends on your planning.

If you don’t leave a Last Will and Testament or only a Last Will and Testament, your estate will be responsible for paying your debts.  If you don’t have an estate, then no debts will be paid.  But, almost everybody leaves behind some kind of probate estate.

A Last Will and Testament usually includes a section or clause that requires your debts be paid.  These are paid first before any money is distributed to your family.  If you don’t leave a Will, then the State laws require your debts be paid.

Also, with or without a Will, any attorney handling the estate gets paid first.  Your final expenses get paid next, then the debts.

These debts include your final medical expenses and funeral costs.  So, if you spend a few days in Intensive Care (ICU), your estate may be responsible for $10,000’s of debts.  That is money your family will not receive.

You can avoid paying your final debts by planning ahead to leave behind little if no probate estate.  The Revocable Living Trust is one of the best methods to make sure there is no probate estate left behind.  The Trust combined with a few other methods makes sure that your assets don’t go to your probate estate, but instead go straight to your spouse and children.  The Trust avoids court and saves time and a lot of money.

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from DeWitt Law Firm, PLLC