Your will and other estate planning documents provide your executor with guidance about what to do with your property after your death. Most people think about how they want to do distribute their belongings and who will care for their dependent children or pets.
Fewer people think about their financial obligations or the possible debts that they could accrue in the final years of their lives. After all, your debts and accounts are in a constant state of flux. You might just hope that there won’t be much of a balance owed on your credit cards when you die.
Unfortunately, there is no way to know how much debt you will have at the time of your death. Whatever you owe, your executor will need to pay before your loved ones get to inherit anything from your estate.
Creditors can bring claims against your estate
Kentucky probate law permits creditors to bring claims against debt left in your estate after your death. Your executor will likely reach out to individual creditors that they know about to advise them of your death. They will also publish notice for other, unknown creditors.
There are three timelines that apply to creditor estate claims in Kentucky. They can bring a claim within eight months of the testator’s death, six months after the probate courts appoint an executor or 60 days after they receive direct notice from that executor. If the creditor doesn’t take action in that time frame, they lose the right to seek repayment from the estate.
Your debt obligations can potentially lead to everything in your estate going to creditors instead of to your loved ones. Only when all of your debts and even your Medicaid benefits have been paid in full can your family receive the remaining assets in your estate.
You can plan ahead to protect your property
Asset protection planning is one way to protect your assets when you die. Medicaid planning can also be a helpful tool, as it can prevent someone from incurring massive medical debts in their golden years.
Being honest with yourself about your financial circumstances and your legacy wishes can help you craft an estate plan that addresses not just your properties but also your financial obligations.