Debt has become such an enormous feature of many people’s lives that it is often overwhelming to consider how one might repay the debts of a person who passes away. In some cases, a person’s debt may significantly overshadow his or her estate, causing those who may stand to receive some portion of the estate to worry about how these debts may affect the estate’s dispersal of assets.

If you have concerns about the debts of a loved one, or worry that your own debts may keep you from leaving your property to those you love, it is important to understand the options available to protect your interests.

Debt does not have to sink an estate entirely, but it is always wise to understand the effects debt may have on an estate and how to protect the property within the estate from creditors or others with an interest in receiving payment.

Does debt die with you?

In general, debt does not transfer upon death, but that does not mean that it evaporates completely when a debtor passes away. Instead, debtors generally repay their debts out of their eta when they pass away, unless they created specific protections to avoid repaying debt upon passing away.

It is also possible that the debts of one person may transfer to another upon death if the other party is already legally liable for that debt in some form, such as a loan with two or more cosigners. If, for instance, you cosigned a loan to get your child a car, that loan is still viable if you pass away, and may simply transfer to your child entirely.

However, in most cases, debts do die with the borrower once they extract all they can from the debtor’s estate. This means that the property people own when they pass away must make good on debts associated with it before it can pass on to heirs.

Protecting an estate against debt

It is sometimes possible to protect your property against your debts by placing portions of your estate in a trust. Some trusts provide the opportunity to avoid probate and also shelter property from debtors who wish to collect repayment by removing the property from the ownership of the debtor, keeping it out of the reach of debt collectors and creditors.

If you hope to use these protections, do not wait to begin building your estate plan. The longer you wait, the greater the likelihood that you may simply never get around to it, leaving your assets and your loved ones vulnerable. Make it a priority to build proper protections to shelter the ones you love from the effects of debt and to make your wishes and legacy known.