So many times, we get wrapped up in either paying down our debt – our mortgages, credit cards, student loans – or we focus on our estate plans. That usually includes our wills, life insurance, retirement, and end of life considerations. Rarely, though, do we see the benefit of covering all the bases for the same ultimate goal. That could be because we’re focused on our mortgage and retirement funds early on in our adult lives and as we approach retirement, we focus on enjoying the sacrifices of those 30 years of paying the mortgage and contributions to our 401 (k). Maybe there’s a better way. Maybe it’s as simple as combining your debt planning and estate planning efforts for a seamless game plan.
The More Things Change, the More They Stay the Same
One of the primary reasons why thinking of the two important life dynamics is because it’s still not uncommon, even in our modern society, for one spouse to handle the finances alone. New realities await the spouse who’s not typically involved in the day to day budgeting but who is suddenly faced with monthly payments, credit card balances and car payments. Naturally, this isn’t limited just to those past retirement age – it’s something that younger couples should at least consider – even if it feels years away.
Debt Planning and Estate Planning in Essex Junction VT
Your estate planning attorney can work with you to figure out the best way to approach credit issues: Should you have joint or separate credit card accounts? What about checking accounts? Depending on your own situation and unique family dynamics, your estate attorney might advise you to consider other options, especially if those situations include remarriage or one spouse who’s better disciplined from a financial perspective.
In some states, joint credit can imply 100 percent obligation of the surviving spouse for any credit card balances; not only that, but if there’s an additional card that’s issued on the same account, it can change the rules in terms of how some banks and card companies may attempt to collect a debt after the death of one spouse. If there are charges after the death of that spouse, that could change the “rules”, so to speak, too.
In many states, it’s the estate’s responsibility to handle unpaid balances. That can ultimately affect the joint assets, even if it doesn’t affect the surviving spouse’s credit history. Don’t forget community property states, either. The guidelines vary greatly when it comes to paying creditors. Again, your estate planning lawyer can provide legal guidance.
On joint accounts, you’ll need to maintain payments as you always have; for those open accounts in your spouse’s name, the estate will likely shoulder those payments. Your credit rating is at stake, remember.
Finally, there’s another important reality in our modern society: identity theft. It’s one of the fastest growing crimes in the U.S. Make no mistake: identity thieves troll the obituary pages in search of those whom they can prey upon in difficult times. This is just one good reason why checking your credit report often is always advised. You are entitled, by law, to one complimentary credit report annually. Take advantage of that, especially in these difficult times, so that you can catch potential problems. By taking a proactive stance versus a reactive one, you’re better able to avoid adding another problem as you go about the business of grieving your loved one.
As your estate planning lawyer, our goal is to help you as you help yourself in preparing these important legal and financial documents. Give us a call and let’s see how current your estate plan is.