When someone dies in Tennessee, they likely leave behind close loved ones and also personal property. They may also have debts that they did not pay in full before their passing. Tennessee testators creating estate plans often make protection for their vulnerable loved ones and instructions for their most valuable possessions their top priority.
They may spend less time thinking about financial obligations than they do about the idea of having their children inherit certain resources. Unfortunately, the failure to adequately resolve personal financial obligations can diminish what family members actually inherit from an estate. Under Tennessee law, the repayment of creditors typically occurs before the distribution of assets to someone’s selected beneficiaries.
How can those putting together an estate plan prevent their debts from undermining their intentions?
By arranging to pay their creditors
Some estate plans specifically include a comprehensive inventory of personal assets and financial obligations. A testator can diminish how difficult estate administration is for their family members by providing account information for their financial obligations and arranging to pay those debts in full. They might take on extra life insurance, for example, to ensure their loved ones can pay off their student loans. Other times, they may reserve certain assets specifically for the repayment of creditors. Testators can keep their debts from undermining their wishes by arranging to have their family members pay their debts after their passing.
By protecting specific assets
Some people recognize that they could die with debt and may not have the resources necessary to pay those debts in full at the time of their passing. They might therefore seek to protect their assets by engaging in asset protection planning. Someone can simultaneously improve their likelihood of accessing important resources, like long-term care coverage from Medicaid, while also protecting their property from lawsuits while they are alive or liquidation after their death. Moving assets into a trust is one of several strategies that could help reduce the risk that all of someone’s property might go to creditors rather than their loved ones after their death.
Those who recognize that creditor claims take priority over their own wishes after their passing may have an easier time establishing an estate plan that provides protection for them as they age and an inheritance for their loved ones after their death.
