It’s always good to get answers to your burning questions. Every month, Devin and John answer questions that have been sent in by listeners just like you.
First, Arlene wants to know what happens to her debts after she dies. John guesses she is probably asking whether her children will be responsible for those debts. It’s a good question! The short answer is no, but, of course, there is a longer answer.
There are a couple of different kinds of debts. Secured debts are tied to a particular asset, like a house or a car. If the asset is transferred to a child after death, the loan needs to be repaid, possibly by the child.
Unsecured debts include things like credit cards and signature loans. Generally speaking, your kids are not going to be responsible for paying for your unsecured debts, but your estate will probably need to pay those creditors.
The rules vary between the states, but there’s usually an order of who gets paid in what order, and creditors are somewhere on the list before your remaining assets are distributed to your heirs.
Then Jay wants to talk about a purchase he wants to make. It might be a little extravagant, and his financial advisor is against the purchase. Both Devin and John have seen both sides of this, folks who have spent too much of their retirement, and folks who haven’t spent nearly enough. Devin threw out a possible rule-of-thumb: if the purchase exceeds 5% of your net worth, and your advisors are expressing concern, maybe you need to think a little more.
Highlights of this week’s episode:
Filial responsibility laws – what they are and why you need to know
The downside of leaving an inheritance
Keeping an eye out for advisors that are trying to tell you what to do
The time John’s grandfather bought a backhoe to remove some tree stumps
Resources mentioned in this show:
Devin and John’s free ebook: www.bigpictureretirement.net/steps
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