While death might release the decedent from financial obligations personally, it doesn’t mean the debts and financial obligations disappear from existence. It is well and good to jokingly claim, “I am planning it out so that my final cheque bounces,” but that can leave your estate and heirs in an untenable position. Estate bankruptcy is a real thing that happens more often than you might realize.
The first thing to understand is that there is a difference between an insolvent estate and a bankrupt one. An estate is insolvent if the debts are valued at more than the assets. It becomes a bankrupt estate once bankruptcy has been declared and the matter turned over to a bankruptcy estate trustee. At this point, the executor of the estate or the court-appointed administrator is no longer in charge.
The best thing you can do is work with a financial planner to ensure that your holdings will adequately cover any debts that you have. It is far better to deal with personal insolvency concerns before the situation is put into the hands of someone who won’t necessarily have the best interests of your heirs in mind. If it is not possible to make your estate solvent, you should consult with a licensed regulation professional recognized by federal and provincial governments experienced in debt after death concerns.
If you have questions about estate bankruptcy and would like financial planning services, give us a call at Morgan & Partners Inc. We bring over 25 years of experience to the table, which enables us to best guide you to avoid estate bankruptcy or to better understand it as an heir faced with this issue. Call today to learn more.