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.
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