The Trouble with an Insolvent Estate
October 25, 2012 By Northern California Center for Estate Planning and Elder Law
It is almost unheard of for someone to die in the U.S. without owning any property whatsoever. This means that virtually everyone leaves an estate of some type when they pass. It may just be a couple of socks and a pair of shoes but, technically, that is an estate. And every estate – no matter how large or how small – may be divided into one of two categories: a solvent estate or an insolvent estate.
A solvent estate does not cause problems, generally. This is an estate that has enough assets to pay off any creditors that are owed, and still has enough left for the heirs. In other words, there may be creditors with claims against the estate but it doesn’t matter since there are more than enough assets for both the creditors and the heirs.
An insolvent estate, however, does cause problems. It is bogged down in debt, making it unlikely that heirs of the estate will receive anything. Creditors of the estate will have a specified time frame in which to file a claim for satisfaction of the debt, and, if approved by the court, each creditor will probably only receive a fraction of what they are owed. Further, in order for the personal representative of the estate to pay off the claims, it’s likely to become necessary for him or her to sell off the personal property and family heirlooms of the estate in order to garner more cash for the creditors.
Comprehensive and thorough estate planning can go a long way to minimizing or eliminating the potential for an insolvent estate and the problems it causes. The best way to accomplish this goal is to work with an experienced and qualified estate planning attorney. Bargain basement wills and trusts sold by non lawyers, on CDs and on the Internet will not provide the necessary provisions for adequate creditor protection and planning.
ABOUT THE AUTHOR: Timothy P Murphy
Experienced estate planning attorneys Sacramento CA of the Northern California Estate Planning Counselors, LLP offers estate planning and business planning resources to residents of Sacramento CA.
Copyright Northern California Center for Estate Planning and Elder Law
More information about Northern California Center for Estate Planning and Elder Law
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
An insolvent estate, however, does cause problems. It is bogged down in debt, making it unlikely that heirs of the estate will receive anything. Creditors of the estate will have a specified time frame in which to file a claim for satisfaction of the debt, and, if approved by the court, each creditor will probably only receive a fraction of what they are owed. Further, in order for the personal representative of the estate to pay off the claims, it’s likely to become necessary for him or her to sell off the personal property and family heirlooms of the estate in order to garner more cash for the creditors.
Comprehensive and thorough estate planning can go a long way to minimizing or eliminating the potential for an insolvent estate and the problems it causes. The best way to accomplish this goal is to work with an experienced and qualified estate planning attorney. Bargain basement wills and trusts sold by non lawyers, on CDs and on the Internet will not provide the necessary provisions for adequate creditor protection and planning.
ABOUT THE AUTHOR: Timothy P Murphy
Experienced estate planning attorneys Sacramento CA of the Northern California Estate Planning Counselors, LLP offers estate planning and business planning resources to residents of Sacramento CA.
Copyright Northern California Center for Estate Planning and Elder Law
More information about Northern California Center for Estate Planning and Elder Law
View all articles published by Northern California Center for Estate Planning and Elder Law
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
