Estate planning is a complex process that involves a great deal of attention to detail. However, truly comprehensive estate planning goes beyond creating a Last Will and Testament or even a trust and includes things like understanding how debt will affect your estate once you die. The best way to avoid the negative effects of debt on your estate is, of course, to avoid debt. However, that is often impossible to do today. In fact, according to sources cited by a recent Yahoo! Finance article around 73 percent of Americans have outstanding debt when they die with an average debt of $62,000 per person. As such, it is important to understand your debt as well as how to manage it appropriately to minimize any potential financial burden such debt could cost your loved ones.
Different Types of Debt
There are several different types of debt, and understanding the differences between them as well as how each type will affect you can help you understand how to manage them. The first type of debt is secured debt. Secured debt is debt that has been guaranteed by some type of collateral. This allows lenders to provide better interest rates on secured debt because a default on such debt typically awards the collateral to the lender. The most common examples of secured debt include residences and vehicles.