It’s not uncommon for a marriage to be smooth sailing until the issue of money arises. Dealing with marital debt and estate planning can be a sensitive topic, especially for older adults. Hiring the services of an estate planning attorney can be a huge help in navigating the tricky terrain of love, money, and death.
First, it’s important to understand how marital debt plays a role in estate planning, especially when approaching an elderly life season. From here, it’s easier to understand the impact of debt, how to best prepare your estate, and what to do with shared debt.
Understanding Marital Debt and Estate Planning in Florida
Florida law states that both marital assets and liabilities are split, following the principle of equitable distribution. In this way, assets and liabilities are split in a fair and equitable manner.
Under Florida’s equitable distribution law, you will be liable for any debts that you entered while being married. For the court to hold you liable for the debt that is only held in the deceased’s name, then you would have to sign an agreement.
It’s also possible that Florida courts could identify a potential dissipation of assets. In this instance, it’s determined that you have incurred debt as a result of your spouse’s reckless behavior, and you may not be held legally responsible to pay them.
The Impact of Debt
There are ways to reduce the impact of debt, and estate planning plays a key role in the process. The type of debt, such as personal debt or business debt, also plays a part.
Personal debt isn’t usually passed along. Instead, the estate becomes responsible for repayment. For example, the credit card balance and outstanding loans. However, shared debt that is incurred during a marriage belongs to the couple and both may be responsible for repayment of the debt.
Business debt largely depends on the structure of the business and the steps that have been taken in preparation. For example, an LLC protects personal assets from being used to pay for any debt.
As each instance is unique, it’s important to have the guidance of a knowledgeable estate planning attorney who is well-versed in Florida’s laws.
Estate Planning Tools and Steps
Regardless of your specific situation, there are a few basic estate planning tools that should be considered when considering marital debt.
For example, setting up a will and a living trust are two steps that offer benefits such as avoiding probate and reducing estate settlement costs. When establishing these documents, it’s important to consider creditors that are owed and how they will be reimbursed. Even so, there are certain steps to take that can protect assets from being claimed by creditors.
Consider the following steps as options to keep assets protected:
- Beneficiary designations – naming a specific beneficiary on accounts such as retirement plans, and 401K plans will ensure that the assets bypass your estate and are paid directly to the beneficiary
- Life insurance – the payout from life insurance can minimize the impact of debt on your beneficiaries (including your spouse)
- Joint ownership – through methods such as a joint bank account with right of survivorship
The responsibility of shared debts is where the situation can get a bit blurry, and an attorney can offer particular value. Certain factors that impact the debt repayment include the type of account and the terms that it follows.
With this in mind, planning ahead can have a few notable benefits, especially with regard to joint accounts or loans with cosigners.
At the law offices,of Gary I. Handin, P.A. we’re proud to offer more than five decades of experience in estate planning and marital law. If you’re an older couple looking for advice on marital debt and how it fits into the estate planning process, then we’d love to hear from you.