When planning to leave assets to heirs, you want to consider what you have to leave to them, including money, real estate and other property. Maintaining accurate records of all of these is an important part of estate planning. Another important part of that process is calculating the debts that you have, so your heirs won't be caught by surprise.
Assets above a specific level mandated by law will be placed into the probate process in many cases. When this happens, a substantial amount of your money may go to pay off your debts. Your personal representative, referred to by many as executor, will have to publish a notice in the local paper about the estate.
The notice informs readers about your passing and sets the clock in motion for anyone who wants to file a claim against your estate. In addition to being in the paper, it will also be sent to all of your creditors. They will then have the opportunity to go after your estate for payment of the debts you incurred.
Trusts are one way to address this. However, when considering that option, it is important to look at whether or not a trust is revocable. If it is revocable at the time of your passing, it can be just as subject to your creditors' claims as the probate assets of the estate are. Fortunately, if creditors wait too long, their time to make a claim will run out and they won't be able to anymore.
All of these matters can get involved quickly. How they should be handled depends on your estate, your debts and the state you live in. For those in New Jersey, the advice of an experienced attorney can help ensure your wishes are followed in a detailed estate plan.
Source: The Times Herald, "Estate and trust assets subject to the deceased’s debts" Oct. 04, 2014