Wealth.   Perhaps it’s best to enjoy it now; because you certainly won’t be taking it with you to the hereafter.  It is a sobering thought, and one made a little less depressing, by the reality that you won’t be able to take your debt with you either.

While we don’t physically take our debts with us to the grave, in many situations these debts, contrary to widespread belief, do not necessarily die with us.  In other words, we leave them behind, usually with loved ones, to deal with.

Upon your death, if you have real estate secured by a mortgage, the bank will still get paid.  Alas, the debt won’t just disappear.  The bank will use the house as a security, an asset that they can rely upon to be repaid. . . even in your absence.   It also follows that if you have other debts these will generally need to be paid out of your estate before any distribution of your estate can occur.

In some circumstances, debts may even exceed the value of the estate.  In situations of bankrupt estates, it is critical to identify this early on in the administration of an estate, especially if you are the executor. Why?  In a nutshell in some circumstances an executor may personally be responsible for the debt (or parts of it that accrued after death).

Occasionally I have had debts waived.  For example, in an estate where a couple owned everything together, (home, bank accounts ), if one dies those combined assets automatically become the sole ownership of the surviving spouse.  In one such scenario there was a large credit card debt in the deceased’s name.  Since credit cards do not take security, and no one else had guaranteed payment, there were no assets in the estate to make payment.  The credit card provider just had to lump it. THERE IS NO OBLIGATION FOR THE SPOUSE, EXECUTOR OR ANYONE ELSE TO MAKE PAYMENT OR TAKE ON PAYMENT OF THAT DEBT IN THAT SCENARIO.

Since all situations are different, getting legal advice early is a must.  Accordingly, I must highlight the importance of having a valid and well thought out Will and Estate plan.