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In addition to making a list of your financial assets, it’s important to have a complete record of your liabilities.

When you die, your creditors will want to be paid before the assets in the estate are distributed to the beneficiaries. Your liabilities could include current bills, credit card balances, the mortgage on your home, car payments, bank loans, or debts to other individuals.

Bills You Owe

The easiest solution to paying current bills is to have another signer on your bank account. Be sure to set up the account as Joint Tenants with Right of Survivorship (JTWROS). That way your co-signer can pay bills on time, even before the estate has been settled. You’ll need to keep enough money in the account to pay the monthly bills that are due.

Credit Card Balances

It’s best to have money in your joint bank account to cover the monthly credit card bills. If you’re carrying a balance on your credit card (not paying it off completely each month), then at least the minimum payment should be sent on time. Additional funds will be needed to pay off the full balance. The credit card balance should be paid in full before the assets of the estate are distributed.

Home Mortgage

It’s important that the mortgage payments are made on time so that the bank doesn’t foreclose, causing the owner to lose the value of the equity they have in their house. If the mortgage payments are more than the survivors can afford, their options will be to sell the house, refinance, or get temporary or long-term financial help from a family member or friend.

Car Payments

The person who takes ownership of a motor vehicle after a death becomes responsible for continuing to make the car payments. If they can’t afford the payments, it’s better to sell the car and buy a less expensive vehicle.

Bank Loans

A bank that has loaned money to the deceased will want to be repaid before any assets of the estate are distributed. If there is not enough money in the estate to repay the loan, then the bank may not receive full repayment of the loan.

Other Debts

Any other loans or debts will also need to be paid before the estate is settled. The only exception might be if a friend or family member decides to forgive a personal loan to the deceased.

Related Issues
Direct transfer of assets
Durable power of attorney for finances
Estate planning
Life insurance
Safe deposit box
Will or living trust

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