There is a chance that you will still have unpaid debts upon your death. However, this does not mean the parties you owe money to will give up trying to collect on your outstanding amounts. They could try to seek payment from your remaining assets.
Fortunately, some of your assets may remain safe from creditor claims. It depends on how you pass your money and property to heirs through your estate plans.
Assets in your estate
According to CNBC, assets that make up your estate are at risk from creditors. After your death, your executor must notify your creditors that you have died. This gives them the opportunity to make claims against your estate if they wish. This has the potential to drag out probate if your executor believes a creditor claim is not valid. It could take a protracted period in court to sort out the dispute.
Assets outside of your estate
There are some assets that do not end up in your estate. These are accounts and properties that have beneficiary designations, payable-on-death provisions, or co-ownership provisions. Common examples include the following:
- Property or money in a trust
- Life insurance benefits
- Jointly owned homes and vehicles
- Retirement accounts such as 401(k)s
After you die, these assets go directly to beneficiaries or the co-owner assumes full ownership. Since they do not go through probate, these assets are not subject to creditor claims on your estate.
Proper planning can avoid probate
Given that beneficiary designations and other arrangements can avoid probate, your family may benefit if you plan accordingly. Your loved ones will not have to worry about the outcome of a court battle with creditors if they can receive your property through other means.