When you think about estate planning, you typically think about distributing your assets and leaving monetary gifts to those you love. It is also possible for you to leave the gift of forgiveness in your estate plan. If you have a loved one who owes you money, you can erase the debt upon your death that would otherwise be due and owing to your estate. This allows you to leave something of value to the person who is indebted to you without diminishing the value of your estate.
How does debt forgiveness in your estate plan work? You must make it clear in your plan documents that you are erasing the debt owed to you by the specific individual upon your death. As an added benefit to your estate, your elimination of the debt means that the personal representative will not be required to take the time and effort to collect the outstanding balance.
It is important to note, however, that if the debt is owed to you and your spouse, you cannot forgive the entire amount alone. Both you and your spouse must agree to forgive the entire debt owed. Otherwise, your estate plan can provide that you are erasing the portion owed to you, or one-half of the balance due.
Forgiving a debt in your estate plan can give the debtor much to be thankful for, while also benefiting your estate by reducing collection costs. If you are interested in creating an estate plan that distributes your assets and forgives debts owed to you, contact The Curran Law Firm to learn more!