Taxes & Debt

What happens when you leave behind debt?

When you pass your debts will become the responsibility of your estate. Your estate will include everything you owned a the time of your death. Your personal representative under your will, or the trustee under your trust, will use your estate assets to pay off your debt. It is important to note that your family members and beneficiaries are not personally responsible for paying your debt. Under a will, the payment of your debt and the distribution of your assets will occur through the probate process.

What about taxes?

Your personal representative or trustee will need to file your personal income taxes for the year in which you pass. All income and expenses after death are considered part of the estate. Estate income taxes will need to be filed for each year that your estate remains open. Lastly, certain estates will be subject to estate taxes, this is different than estate income taxes. If your estate is under the estate tax exemption amount, your estate will not be subject to this tax. The federal government establishes the estate tax exemption through legislation and it is adjusted each year for inflation. It is important to note that the exemption amount is subject to change.