An unexpected passing can uncover unexpected expenses, including credit card balances and other bills that were not anticipated in estate planning.
In these circumstances, it’s important to consider how to discharge these bills, and whether assets intended to provide for a surviving spouse, or children, should be eaten up covering these costs.
Here’s a recent example from the Goldhar insolvency practice:
I received a phone call from an insurance broker who was paying out of the proceeds of a large life insurance policy to a widow who had lost her husband recently – and many years before either spouse expected to be dealing with matrimonial estate matters.
The assets in the husband’s estate consisted of his equity in the matrimonial home, and a substantial death benefit from the insurance policy. Both assets passed automatically to his widow, free and clear and without tax. He had planned to leave her with enough funds to provide for her, and if the money was well managed she would always be comfortable. But his death was unexpected, and besides the assets, he left behind substantial credit card bills.
The insurance broker called me because he didn’t want the widow to eat into her nest egg paying bills that might be wiped away by an estate insolvency.
He was right. Given the specific circumstances, we were able to file an assignment in bankruptcy for the husband’s estate, preserving the widow’s funds and home entirely.
The widow was concerned about dishonoring her husband’s memory. We explained to her how the bankruptcy would be structured and, even more important, why there was no disrespect in washing away the unsecured liabilities. She understood that her husband had not planned to leave these bills unpaid, and that the bankruptcy would be known only to her insurance broker and her estate lawyer. Much relieved, she was able to cherish his memory and shed the debt.
When a loved passes, there is no disrespect in reviewing the estate liabilities with Goldhar. I will personally consider the circumstances of the estate with you and your family and professional advisors. Together, if required, we can find a personalized solution to preserve the assets and shed the debt.
Referrers and professional advisors are welcome to call on behalf of the estate.
Call me at 1 855 541 5114. Or email me here at www.shedthedebt.ca