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Outstanding debt considered during estate planning

When someone in Oklahoma makes the effort to write a will, that person's relatives may be relieved that the estate is prepared for their loved one's eventual death. They may even look forward to receiving a bit of an inheritance from the loved one's estate. However, estate planning is many-faceted, and having a will may be only the beginning. For example, if a loved one dies owing money to creditors, even that small inheritance may be in jeopardy.

Once a loved one dies, a third party usually contacts any heirs mentioned in a will. This may be a lawyer or the executor appointed in the will. However, before any assets can be distributed to heirs, an accounting of estate debts must be made. Those debtors get first priority, and they are typically paid from the estate's assets, such as bank accounts or other liquid assets. Some surveys show that nearly 40 percent of seniors have debt without a plan to pay it off.

Taxes may also take a bite out of the inheritance. Depending on the estate's value and the state in which the deceased lived, both state and federal taxes may be assessed. The current individual federal exemption is $5,120,000, so if the estate value is lower than that, paying federal taxes should not be necessary.

Estate planning advocates encourage families to candidly discuss their wills and other plans. Having an open discussion may allow families to better prepare for eventualities like inheritances, debt and taxes. If an Oklahoma estate planning attorney is included in those discussions, there is a better chance that the family will reach a good understanding of the available options and the necessary steps to take to plan an estate wisely.

Source: gobankingrates.com, "Will a Relative's Crazy Spending Risk Your Inheritance?", Jennifer Calonia, Accessed on Feb. 17, 2017

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