Legal Question in Wills and Trusts in Indiana
Will/Debt/Creditors
What is the law regarding my adult children's responsi- bility for my debts upon my death. Because of medical issues and inability to work during several periods in recent years, I have a high debt load, which is signi ficantly greater than my only life insurance (reduced to $30,000 after retirement. I am currntly drawing the retire- ment and medical disability. I am attempting to obtain more life insurance, but because I have diabetes and Parkinson's this may be difficult or too costly. If my children are my beneficiaries (vs. ''estate''), are creditors able to claim the small benefit, which I assume will be taxed before paid out. They will also need to be able to pay funeral expenses. Thank you for any advice you can give me on how this works in Indiana.
2 Answers from Attorneys
Re: Will/Debt/Creditors
The general answer is no but your Executor or Representative will have some obligations to fulfill which will be addressed by your Probate attorney.
Re: Will/Debt/Creditors
Your $30,000 life insurance death benefits, if paid to your children as named beneficiaries, will be non-taxable and will not be in your probate estate and will thus not be subject to claims from your creditors. Retirement and disability payments are also exempt from creditor claims. (There are exceptions, but they arise when someone is abusing the exemptions, so probably do not apply to your case.) Your creditors will be entitled to open a probate estate and attempt to marshall your probate assets so they can be paid. But your children will not be personally liable. Just make sure your life insurance policies name your children, NOT your estate, as the beneficiaries. That way, the death benefit will not be in your probate estate. Good luck.
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