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Home > Blog > Estate Planning > Insolvent Estates: Facing the Reality While You Are Alive

Insolvent Estates: Facing the Reality While You Are Alive


Your life is nothing like the pictures that you see on estate planning brochures.  Those moonlit walks on the beach require health and wealth that you have not possessed in many years and have little hope of possessing in the future.  You worked for as long as your body could tolerate it and have been living on a fixed income ever since.  A meager existence is virtually your only option; public programs provide for basic necessities, but nothing else.  For example, Medicaid will pay for nursing home care for as long as you need it, even if you own your house and your spouse continues to reside there while you are in a nursing home, but it will also pocket your Social Security check and leave you with only a $50 per month personal needs allowance.  The goal of estate planning is to prevent your surviving relatives from preventable financial and emotional stress related to your old age and eventual death.  A Bronx estate planning lawyer can help you with your estate plan, even if you have spent most of your life in financial distress.

How Does Probate Work for an Insolvent Estate?

In estate law, “insolvent” means that an estate owes more money in debts than the value of the estate’s property.  In typical probate proceedings, the personal representative first satisfies the estate’s debts and then distributes the remaining property to the heirs according to the will or the laws of intestate succession, depending on whether the decedent wrote a will.

With an insolvent estate, there is no money left to give the heirs their inheritance after paying the estate’s debts.  In most cases, there is not even enough to pay all the creditors all the money they ask for.  The law sets an order of priority in which the personal representative must settle the claims.  Funeral expenses come first, followed by federal debts, state debts, and then debts to private creditors.

What to Do If You Know There Is Not Enough Money to Go Around

Although it is easy to forget these when you are dealing with financial stress, money is not the most important thing in life.  Even if you have no money to pass on to your family, you should still write a will indicating who should be the personal representative of your estate and specifying your wishes about final disposition of remains.  You also need an advance medical directive indicating your wishes about end-of-life medical care and appointing a relative or attorney to advocate for you in healthcare settings if you become seriously ill.  An estate planning lawyer can also help you pass some of your modest assets to family members outside of probate.

Schedule a Confidential Consultation With a Bronx Estate Planning Attorney

An estate planning lawyer can help you make an estate plan that accounts for your disadvantaged financial situation.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.



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