If you’re like most people, you have some kind of debt – a mortgage, a credit card bill, school or a car loan. What happens when you die? Do your heirs have to pay your bills for you?
According to a recent U.S. News and World Report article, the general rule of thumb is that if there’s enough money in your estate, your bills will be paid out of the assets you’ve left. Those assets will be liquidated to generate the necessary funds.
If there’s not enough money in your estate, here’s what will probably happen. I say “probably” because there are no firm rules in this area and each case is different.
Credit card:
As long as you don’t have a co-signer on your credit card, the odds are that the debt will be discharged by the credit card company. If you have a co-signer, that person will be responsible and will have to pay whatever is owed.
Mortgage:
If the house isn’t paid off, the bank may decide to foreclose…unless someone takes over the monthly payments.
Car:
If you are making car payments when you die, your vehicle can be repossessed by the bank. However, if one of your family members is willing to take over the loan, there should be no problem.
There are a few caveats that you should be aware of.
If you owe a lot of money and make deathbed gifts, your creditors may be able to convince the court to return those gifts to the estate so that their bills can be paid.
Your children or spouse should be careful about cosigning financial agreements for you. This personal financial guarantee may obligate them to repay any money owed through these agreements after you die.
If you don’t want your loved ones “haunted by debt collectors” after you’re gone, make sure they’re careful about what they sign.
For more information about how to manage your estate and what happens when you die, go to www.diesmart.com.
Category Archives: Estate Planning
You’re dead…so what happens to your Bitcoins?
There’s been a
lot of discussion about digital assets and what happens to your bitcoin accounts when you die. When we checked a while ago, we were told that after a certain period of inactivity, your Bitcoin account will disappear and the money you have in it will be gone forever. If you haven’t given your login, password and digital key information to the person(s) you’d like to inherit the money, they cannot access your Bitcoin wallet and they’re out of luck.
Recently, a few companies have tried to address this important issue. One we came across is Bitcoin Estate Plan. Their premise is simple. They automatically deliver bitcoin wallet access instructions to your heirs upon your death or incapacitation. This is accomplished through email, phone and/or a written letter via the postal service. You tell them who you want them to contact and the message you want them to send.
The company “will then email or phone you periodically to confirm that you are still alive. If you do not respond after a specified number of attempts the system will deliver your message to your intended recipient(s) by email, snail mail or phone depending upon which service plan you choose.”
It would be cheaper for you to share the necessary information with your heirs prior to your death. However, if you do, they will have the ability to access your funds at any time. A better option to consider might be a company like Bitcoin Estate Plan. That way, your money won’t disappear when you do.
For more information about digital assets and how to protect them, read our book “Access Denied: Your Digital Estate – Why Passwords Are Now as Important as Passwords”. It’s available at Amazon. Also, check out our website www.diesmart.com.
Don’t let your ex-spouse get your life insurance proceeds
Jackie & Warren Hillman
When you buy a life insurance policy, you name a beneficiary who will inherit the proceeds when you die. It’s important to keep that beneficiary designation up to date or the wrong person may benefit.
One such case that went all the way to the Supreme Court was that of Warren Hillman. Hillman died in 2008 shortly after he was diagnosed with leukemia. He was 66. He had been married three times. When he died, his assets included a life insurance policy worth $124,558.03.
But Hillman made an all too common estate planning error. In 1996, while he was working for the federal government, he took out a life insurance policy and named his second wife, Judy Maretta, as his beneficiary. When he and Maretta divorced in 1998, he didn’t change the beneficiary designation on his policy. It was a policy that was part of a life insurance program for all federal employees and the law for that program says that the proceeds on death are paid according to the beneficiary designation.
He married Jacqueline Hillman in 2002 and was with her until he died.
Since his death, his second ex-wife, Judy Maretta, and his widow had been fighting over that money. In June, 2013, the U.S. Supreme Court found that Maretta was entitled to all of it because she was still listed as the beneficiary.
If your life circumstances change, be sure to update the beneficiary forms for any policies that you have. Otherwise, your ex-spouse may get your life insurance proceeds.
For further information about beneficiaries, go to www.diesmart.com.
An important holiday gift
As we approach the end of another year, it’s a good time to have an important discussion with your family and other loved ones about what will happen when you die. It may be uncomfortable but it’s a gift you should give them before any more time passes.
You should tell them about your estate plan – not necessarily all of the details but where it can be found, that it is up to date and who you have named as your executor. The estate plan should, at a minimum, include your will and your advanced directive; it might also include a trust, a healthcare proxy and a durable power of attorney. You should reassure them that the plan is current and reflects your wishes at the present time. (If it doesn’t, you should get it updated immediately.)
Another critical thing you should discuss is your digital assets. If you pay your bills and conduct other financial transactions online, your executor should be able to access your accounts. The only way to ensure that this is possible is if you leave a list of your passwords for all of them.
You should make sure they know about any accounts that have beneficiary designations and that those designations are up to date. Otherwise, someone who is no longer in your life may inherit from those accounts rather than the person you really want the funds to go to.
Finally, you should discuss with your family and other loved ones your end of life care wishes. It’s not a pleasant topic but you should not burden them with having to make decisions which may not agree with what you would have wanted.
This is an important holiday gift that you should give to your loved ones this year.
For more information about making a digital asset inventory and other end of life decisions, go to www.diesmart.com.
5 ideas to consider when doing estate planning
If you have a spouse and family, you’ll probably leave everything to them. However, if you don’t have a spouse or kids and you’ve been procrastinating doing your estate planning because you’re not sure what to do about all of your stuff, here are 5 ideas you should think about consider. We found them in the Rapid City Journal.
- Consider leaving something to close friends, caregivers or anyone else who you are close to.
- Think about charities that are meaningful to you. What organizations have goals that match your own?
- Think about where a donation could benefit your community. There are places like libraries, volunteer fire departments, arts organizations that would welcome some extra funds. What about giving a piece of art to a hospital or buying a park bench?
- Build relationships with people who share your interest in collections of antique, tools or other items. Then you can pass along your collections to people who will appreciate them and remember you.
- Don’t wait until you’re gone. Consider donating collections to museums or giving personal possessions that you value but don’t necessarily use to someone who would appreciate them.
For more information about estate planning, go to www.diesmart.com.