Upon your death, your estate will need to be dissolved. This involves paying off your creditors, filing your final taxes and distributing whatever assets might be left to your heirs.
Ideally, you want to have enough assets that your estate can pay for your outstanding debts and tax bills and still have plenty to leave your beneficiaries. This is known as a solvent estate.
But sometimes, there’s just not enough to go around and the assets in the estate cannot cover the debts that you left behind. This is known as an insolvent estate and here’s why it’s important:
When your estate is insolvent, your heirs won’t get any inheritance. The probate court will instruct your executor or personal representative to sell your assets to cover your debts. When there’s no more assets to sell, there’s nothing to pass on to your loved ones, meaning that they’ll get nothing from your estate.
That’s probably not what you had in mind, is it?
The best thing you can do right now is take time to consult with an estate planning attorney and start crafting your estate plan. This is the only way to determine how much you’ll likely need to cover your debts and what you’ll have left to leave behindyou’re your family.
Your attorney can also help you set aside liquid assets so that the debts can be easily paid without selling off your property. This ensures that family heirlooms aren’t so at auction to satisfy your liabilities.
To learn more about crafting your own estate plan, contact our office today.