What Happens to Your Debt at Death?
Kristi Mathisen, LNWM Managing Director of Tax and Financial Planning, was recently interviewed by Bankrate.com on a topic most people don’t want to think about: what happens to your assets and debt after you pass away. The answers might suprise you, especially if your primary residence is in Washington State or one of the other eight states that are “community property” states, where assets — and debt — acquired during the marriage belong equally to both partners.
In the article, published earlier this week, Kristi says: “Debts don’t die with you. They survive your death and before considering all of the claims of your family members, your debts get paid first. Then your family inherits.” In community property states, all of a couple’s property can be used to pay the debts at death. Even IRAs you have set up can be raided to pay off creditors, once you pass away.
Some exceptions: the proceeds of life insurance policies, which typically go straight to the named beneficiaries, bypassing creditors. And there’s also a statute of limitations on debt collection after death. In many states, it is one year. But in Washington State, it is just 120 days.
Find out how an estate plan can provide you with control over your assets, privacy, tax savings and less legal hassle in these informative webinars by Kristi: