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Inheritance focus: when estate leaves bills and liabilities

Here’s a bottom-line takeaway for estate heirs from a recent Forbes article written by an author who focuses on estate planning matters. Have a solid understanding of the estate’s unpaid bills and liabilities before spending down that inheritance.

The reason: You could be on the hook for outstanding financial obligations owed by the estate to creditors. Those could range from something as mundane as remaining car payments to more complex obligations revolving around unpaid tax obligations.

Deborah L. Jacobs’ observations in Forbes spell a cautionary tale, but not one that should unduly concern heirs in instances where planners had early and comprehensive input from experienced estate planning counsel. That input will always include close scrutiny of both an estate’s assets and liabilities, with a focus being on an accurate appraisal of liability-free assets and any continuing obligations that might continue to exist when inheritances are about to be doled out.

It’s all about knowing what’s out there, and how heirs might be held accountable for satisfying debts and other liabilities. Jacobs mentions quite a few potential offsets, including mortgage debt, credit card bills, medical expenses and unpaid taxes.

It is obviously key to note that many assets are exempt from creditors, including retirement plans and life insurance policies.

It is important to have a knowledgeable and focused executor to attend to the details of an estate plan, with a central role of that party being awareness of and proper response to outstanding claims from creditors that can impact an estate and heirs.

It is hard to overestimate the importance of knowledge, experience and timely action in the realm of estate planning. A proven attorney in the area can answer questions and provide sound and effective representation.

Source: Forbes, “Heirs left with unpaid bills may inherit more grief than gold,” Deborah L. Jacobs, June 18, 2014

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