If you are going through probate, you likely already know that one important step in the process is notifying the decedent’s creditors. Settling debts is an uncomfortable, but necessary part of the process of settling an estate through probate. During this step, the executor or personal representative will need to identify anyone the decedent owed money to and let them know that their estate is in probate now. Certain assets that are part of the estate may be liquidated in order to satisfy the decedent’s debts. However, other assets are exempt from liquidation. So, what happens if your loved one owed more than their estate is actually worth? It depends on a few factors. If you believe that your loved one’s estate is going to have this problem, an attorney can help protect you. 

Which Assets Are Protected From the Liquidation Requirement?

If your relative had a lot of debt, you might be worried that you will lose your inheritance to their creditors. While it is true that non-exempt assets can be sold off to pay a decedent’s creditors, other assets are exempt from this requirement. 

The two major assets that are exempt from liquidation are retirement savings accounts and life insurance policies. Even if your relative had overwhelming debt, you or your relative’s other designated beneficiaries will be able to keep funds that are secured in a retirement account, like a 401(k), or proceeds from a life insurance policy. 

Most people think of estate planning as something that will only come into play after they have passed away. However, the part of estate planning that mostly matters after you are gone - testamentary planning - is only part of what a comprehensive estate plan can do. The other side of estate planning, known as “incapacity planning,” actually controls what will happen during your end-of-life phase. While it may not be a pleasant thought to confront, the vast majority of us will not be fully-functioning independent adults one moment and gone the next. Most people experience a period later in life where they cannot make sound decisions for themselves. In that event, a well-made incapacity plan will control much of your care. You are the best person to make decisions for yourself, and you can do so by taking the time now to make critical decisions about your own future care. 

The Documents You Need to Create Now to Protect Your Future Self

Ask any nurse who has spent significant time doing bedside care in a hospital setting, and they will tell you just how important documents like a living will are. When a loved one has lost the mental capacity to make their own decisions and becomes ill, families often make rash and emotional decisions. Failing to do incapacity planning can lead to more family conflict and the use of “heroic measures” to prolong the life of a person who is terminally ill and unaware of their situation. 

Documents that everyone should have in place to prevent this type of situation include: 

Creating estate planning documents in the first place is 90% of the battle. Once you have a trust, a will if you need one, a living will, and your powers of attorney all ready to go, choosing the right place to store them is critical. If no one is able to find your documents, then there is a real risk that the plan you worked so hard to create will never be followed. The right place to store your documents is somewhere that your loved ones will be able to easily locate them, but also somewhere that they will be safe.

It is often a good idea to keep multiple copies of certain documents. For other documents, it is by far best to have the original available when it is needed. Your attorney can give you more specific advice on where to keep your documents so that they will be accessible. 

Good Places to Keep Estate Planning Documents

Different types of documents should be stored or kept in different places. Some helpful tips for different estate planning documents include: 

If you have started to look into estate planning a bit, you have probably read over and over that trusts are rapidly becoming the preferred means of testamentary transfer. Certainly, there are numerous benefits of using a trust over a will. Using a trust can allow your beneficiaries to skip a lengthy and costly probate process. It also keeps the handling of your estate private rather than public, reducing the odds of a contest. And, you can use a trust to make controlled distributions over time instead of giving someone - especially a very young adult - one lump sum. 

With all of this in mind, you might wonder why anyone at all still bothers with making a will. There are certain situations in which it is wise to use a will in addition to a trust. Wills are still useful in modern estate planning for many, as they can sometimes accomplish goals that a trust cannot. 

When Should I Use a Will?

In any of the following situations apply to you, you may need a will, even if you are primarily using trusts: 

If you already have an estate plan, when is the last time you pulled it out and looked over it? If it has been a while, you might want to revisit it. People’s lives change over time. Laws change. Families change. It is a wise idea to review your estate planning documents periodically to ensure that the plan you have is still the plan you want.

Estate planning can be an emotional process for some, so it is understandable if you are reluctant to visit the subject more than once. However, even a quick review to make sure that your wishes are still accurately expressed can go a long way towards protecting both you and your loved ones. There are also a few trigger events that should prompt you to take a look at your estate planning documents. Most changes to an existing estate plan can be made relatively quickly and easily with a lawyer’s help. 

When Should I Revisit My Estate Planning Documents?

You may want to review and possibly edit your existing estate plan if one of the following life events takes place: