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In almost all cases, your debt dies with you. Knowing that your family will not have to deal with any debt that you accrued is a relief, but it doesn’t mean that they won’t feel the effects of it. While debt dies with you, all of your assets go directly to paying off as much, if not all, of your debt off. This means that even if you pass with debt, the belongings and value you do have will diminish immediately in order to settle the debts. You want your family to benefit from you and your life insurance policy after you pass, so taking the right actions now can mean the difference in how your family is affected financially after you pass.
What Happens Financially After You Pass
All of your personal assets are first dispensed out to cover any funeral costs, taxes and administrative fees, and finally, any and all debt. This is the general order in which your assets are first divided. This means that your home, your belongings, your cars, and even your life insurance policy will become fair-play in paying these costs and debts.
Increasing Your Value Even When High in Debt
In the case that you are dying with a ton of debt, it might be worth selling your life insurance policy now, if only to take action and increase you’re the value of what you will leave behind for your family. Whatever is typically left over from your life insurance policy after paying off debts is what is divided out among your family, per your final will and testament. If you qualify, selling your life insurance policy for a life settlement can enable you to pay off your debts immediately and then invest whatever is leftover so that the money you are worth will increase in value after you pass away. It also gives you control over how your debts and investments are handled, giving you the opportunity to make sure that your family is better taken care of when you’re gone.
Discussions with financial planners can help you ensure that you pay off debt and manage your money in your retirement well. Always consult a financial professional before making a big financial decision. To read more about where your debt goes after you die, download our whitepaper, Debt After Death.