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Use Your Will to Dictate How to Pay Your Debts

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Use Your Will to Dictate How to Pay Your Debts

October 25, 2017
Geoff Hoatson

The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs how to pay your debts. While generally heirs cannot inherit debt, debt can reduce what they receive. Spelling out how debt should be paid can help your heirs.

If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would like to leave to specific heirs. There are two types of debts you might leave behind:

  • Secured debt is debt that is attached to a piece of property or an asset, such as a car loan or a mortgage.
  • Unsecured debt is any debt that isn't backed by an underlying asset, such as credit card debt or medical bills.

When you leave an asset that has debt attached to it to your heirs, the debt stays on the property. Your heirs can either continue to pay on the debt or sell the property to pay off the debt. If you believe this would cause a burden for your heirs, you can leave them assets in your will specifically designated to pay off the debt.

With unsecured debt, although your heirs will not have to pay off the debt personally, the executor will have to pay the debt using estate assets. You can specify in your will which assets to use to pay these debts. For example, suppose you have a valuable collectible that you want one of your heirs to have. You can specify that the executor use assets in your bank account to pay any debts before selling the collectible. And if you want to leave liquid assets, like a bank account, CD, or stocks to an heir, you should designate in your will what you would like your executor to use instead to satisfy debts.

Not everyone needs to spell out how to pay debt in a will. If your debt is negligible or your entire estate is going to just one or two people, it may not be necessary. Contact us here at Family First Firm at (407) 574-8125 to come up with a plan for handling your debts.

Copyright © 2022. Family First Firm – Medicaid & Elder Law Attorneys. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Family First Firm – Medicaid & Elder Law Attorneys
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