What happens to your debt after you die?

One question I get often from clients is, What happens to my debt after I die? Great question – but before we delve into the answers, I wanted to share with you three opportunities in June to attend a seminar I’m hosting with Round Table Wealth Management titled: Trump: Time to Update Your Investment & Estate Plan, But How? On June 7, I’ll be presenting in Scotch Plains, on June 8 in Red Bank, and on June 13 in Princeton. Please email me if you’d like to attend and I’ll send you an invitation! Our first seminar in Franklin Lakes was a great success!


Back to our regularly scheduled programming: Debt. While you ponder your mortality from time and time and think about the distribution of your assets, have you thought about what will happen to your outstanding debt?

In the past we have written about the need to appoint an executor you trust who will administer your estate in the most efficient way possible. One of the responsibilities of your executor is to take care of your outstanding debt. This is done by using the assets and property you leave behind to cover the balance. It some cases, this may require liquidation of property. Whatever is left over after your debts have been paid may then be distributed among your heirs.

Consider the following types of debt and what happens to it when you die:

  • Student loans — Federal loans are discharged upon death. Private loans, however, are not. In some rare cases, a private loan company may issue debt forgiveness, but it is unlikely. If you pass away with private student loan debt, the balance will attempt to be collected from your remaining assets and estate. Should your estate fail to cover the cost, the private loan company will then attempt to collect the debt from your spouse.
  • Credit card — If you are the sole owner of the credit card debt, then the credit card company will attempt to collect the balance from your estate. Should you have a joint credit card account, the co-signor of the account will be responsible for the outstanding debt.
  • Medical debt — In the event that you have medical debt, the funds from your estate will be used by your executor to cover the cost. Another person may take on the responsibility of your medical debt if they signed legal documents agreeing to do so. In the event that your estate is unable to pay off your medical debt, it will not be inherited by your heirs.

When drafting your estate plan, it is always a good idea to try and reduce the debt you owe by as much as possible, especially if you want to leave substantial property or assets to your loved ones. Any debt you accrue while you’re alive may deprive your family of the inheritance you intended for them to enjoy.

Whether you need help setting up a trust, probating a will or creating a detailed estate plan, be sure to consult with a skilled attorney. To discuss your estate planning matter with us, contact Alec Borenstein, Esq., a partner with the firm at alec@bmcestateplanning.com or call 908-236-6457 today.

The Documents You Need for Your Estate Plan

The Documents You Need for Your Estate Plan

Whether you are thinking about creating an estate plan or already have one in place, it is important to ensure you have the proper documentation. Unless you have a law degree, understanding estate planning can be confusing.

In this DIY age, you may be inclined to try and create your estate plan on your own via the internet. Don’t. In fact, without an effective estate plan and proper documentation, your future heirs may suffer and your last wishes may not be upheld.

Following are the documents you need to ensure your legacy is preserved:

1. A will — For many people, this is the be all/end all of estate planning – the holiest of holy documents and the only one seen as worth having. A will is indeed vital to your estate plan as it provides instructions on how your property and assets should be disposed of and who your beneficiaries should be. In your will, you may describe how you wish to be buried, what charities you wish to donate to, who should care for your pets, and more. Additionally, your will allows you to name an executor to handle the administration of your estate after your death. Without this document, your estate is subject to New Jersey’s intestacy laws.

2. A health care proxy — A health care proxy is a document that names a trusted individual to make decisions about your health should you become unconscious or mentally disabled. No one wants to imagine what might happen to their loved ones if they should fall into a vegetative state or suffer from a terrible illness like dementia. Yet considering such possibilities and setting up a health care proxy is important to ensure your family knows your wishes should something happen to you.

3. Durable Power of attorney — Unfortunately, many estate planners stop at their will. While your will is extremely important to your estate plan, the buck doesn’t stop there. What if you should become incapacitated via accident, injury or illness? Who will handle decisions about your healthcare and finances? With a durable power of attorney, you name a trusted person who takes care of things like paying your bills, making medical decisions or handling your investments.

No two estate plans are the same. Your estate plan reflects your life, your estate, your assets and the legacy you wish to leave behind. Depending on your unique situation, your plan may be more or less complicated.

For more information about estate planning in Union or Hunterdon County, consult with Alec Borenstein, Esq., a partner with the firm at alec@bmcestateplanning.com or call 908-236-6457 today.

Estate Planning 101: Terms You Need to Know

Estate Planning 101

Estate Planning 101: Terms You Need to Know

Taking the time to sit down and plan your estate is one of the wisest decisions you can make in life. Strategic estate planning distributes your wealth, businesses, properties and other assets to your loved ones after you die while helping them avoid unnecessary taxes, fees and lengthy wait times.

Estate planning may seem simple enough, but you should be mindful of the many pitfalls along the way. Details are crucial, and without professional guidance, you could leave language ambiguous or otherwise create reasons to question your intent or your will’s validity. For example, there are countless stories of children who are unintentionally disinherited because of seemingly insignificant mistakes in a parent’s will, and they end up having to take costly legal action to resolve disputes and other issues.

So, what do you need to know when you’re creating an estate plan? First, you must keep in mind that there is no substitute for an experienced and trustworthy attorney (and financial planner) if you wish for your legacy to be intact and inherited by the people you love. Before meeting with your lawyer, familiarize yourself with the following terms so you understand the upcoming process more thoroughly:

  • Probate — Probate is the process of legally validating a will. The two primary reasons that people wish to avoid probate are that it ties up property, sometimes for months, and that it can be expensive. A thoughtful estate plan can avoid probate altogether.  On the other hand, in New Jersey the probate process is not too complicated, and it might be easier and cheaper to actually not avoid probate.  Everyone’s estate plan is unique, and it’s important to consult an attorney to discuss your options.
  • Will — Your will contains your last wishes for your property and assets after you die. In New Jersey, if you die without a will, your belongings are divided and distributed according to the state’s intestacy laws. In addition to specifying to whom you wish to leave your possessions, your will can name a guardian for your children, a trusted person to manage the property you leave to your children and an executor to your estate.
  • Executor — An executor is a person you designate to manage your estate through probate. Your executor distributes your assets to the beneficiaries you have named in your will. Among additional responsibilities, he or she pays all outstanding bills due at your death and settles any lingering debts.
  • Testator — A testator is the writer of a will.
  • Trustee — If you create a trust as part of your estate plan, you will need to name a trustee to look after the property held within the trust. A trustee is responsible for maintaining the property in a trust for the beneficiaries of the trust.
  • Advance directives — Most documents in an estate plan relate to what happens after your death. Advance directives, on the other hand, address who should manage your finances and medical care should you remain alive but suffer physical or mental incapacity. Advance healthcare directives also allow you to make decisions before the point of incapacity, so your loved ones are not left wondering how best to respect your wishes.

The terms listed above should help you understand the basic process of planning your estate. But you still need an attorney who can execute your plan effectively. Seek advice from Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908­236­6457 to learn more.

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