You can plan to pay your debts before you pass away. In many cases, this is achievable and can make things easier for your family. You may want to pay off your mortgage or ensure that you pay back business loans, for example. It may be as simple as paying down your credit card frequently so that there is not an extensive amount of debt.
But it is difficult to pay everything. This is especially true if you pass away unexpectedly. You may not have paid property taxes or income taxes yet for the year. You may still have credit card debt because you use that card for daily purchases or utilities. Even though you have been planning in advance, some debt is probably going to remain, so who is responsible for paying it?
Does the next generation inherit that debt?
Parents often ask this question because they are worried that their adult children are going to inherit their debt. The last thing they want is to pass away suddenly and leave a child with an unexpected $10,000 in credit card bills, for example.
But the good news is that debt is not inherited this way. Instead, the remaining debt is just an obligation for your estate. This may mean that some money beneficiaries assumed they would inherit has to be used by the estate executor, who is in charge of paying those debts. But they can use that money to pay the debt off first and then distribute the remaining assets, so there are no additional financial obligations for the next generation.
The financial side of estate planning is very important for you and your family, and it can help to work with an experienced law firm when making your estate plan.