Do you have a considerable amount of personal debt? If so, you are far from alone. According to the Federal Reserve Bank of New York, Americans collectively held $14.5 trillion in household debt in the Fourth Quarter of 2019 — a number that has been rising in recent years. Dealing with the outstanding debt and other financial obligations is an important part of any effective estate plan. Here, our Cortland estate planning lawyer explains key things you need to know about debt and inheritance in Ohio.
Children are Not Personally Liable for Your Debt
First and foremost, it is important to emphasize children are not legally responsible for their parent’s personal debt — at least assuming they did not co-sign on a loan. The big credit card companies cannot come after your child for your debt simply because they are related to you. Debt is not inherited. However, thinking about debt is important. Creditors can and will come after your estate for money owed to them. Proper planning is crucial to protect the financial interests of your children and your family.
Creditors Will Likely Make Claims Against Your Estate
Before an estate can be settled, all valid creditor claims must be addressed. The estate administrator has a duty to notify affected creditors of a person’s passing. From there, they will be tasked with resolving outstanding claims. As an example, imagine you want to pass down $65,000 to your family member through your will. If you have $15,000 in outstanding debt, the creditor is likely to try to claim their share before that $65,000 is distributed. Assuming there are no issues, a creditor will likely have a right to claim the full amount they are owed.
Ohio Law: Unsecured Creditors Have Limited Time to Make a Claim
Unsecured creditors have limited time to act against a person’s estate. Under Ohio law (ORC § 2117.06), all creditors’ claims must be presented within six (6) months of the date of the death. If a creditor fails to present their claim before the deadline, they will likely lose their right to recover anything.
To be clear, this law applies to unsecured claims — such as personal loans or credit card debt. In contrast, secured claims, including mortgages and vehicle loans, run with the property — meaning creditors have the right to foreclose/repossess if ongoing payments are not made by the estate.
Call Our Cortland, OH Estate Planning Attorney for Immediate Assistance
At The Law Office of John C. Grundy, our Ohio Estate planning lawyer is an attentive and solutions-oriented advocate for clients. If you have questions about estate planning and debt, we are available to help. For a no cost, completely confidential consultation, please contact our legal team today. From our Cortland law office, we serve communities throughout Northeast Ohio, including in Warren, Andover, Williamsfield, North Bloomfield and West Farmington.