Perhaps your biggest asset is your home, or maybe you have financial accounts that you will pass to your children when you die. If you are like most individuals thinking about their legacy, your main concern will be deciding who gets which asset.
Although this approach is practical, it is also short-sighted. You need to consider not just your most valuable property but also your most significant financial obligations when planning your estate. A good estate plan also addresses your debts and healthcare costs.
Debt can affect everyone’s inheritance
If you died tomorrow, would your family have the resources necessary to pay off the full balance of your student loans and credit cards? If not, then your estate plan needs to address your debt. Additionally, if you don’t have the personal assets or health insurance necessary to fully cover nursing home care or other expensive medical needs that you might have later in life, you also need to consider whether you would qualify for Medicaid and what medical debts you might accrue.
Both individual creditors and the Medicaid estate recovery program could come after your property when you die. Creditor claims take precedence over your family’s right to inherit, which means that your spouse and children could receive nothing at all from your estate if your debt is high enough when you die.
Some people create trusts to address their debts and plan for Medicaid, but there may be other strategies that would work for your family. What is most important is that you recognize the liability caused by debts and future medical expenses and have a plan in place to protect your property so that you can pass it to your loved ones after you die.
Adding the right documents to your estate plan will protect you as you age and safeguard the property you want to leave for the people you love.