“Can I Cancel a Loan in My Will?”
Most people think of estate planning as a way to leave material assets and instructions to others. However, we occasionally hear the question: “Can I use my will to cancel a loan?” We’ll discuss a few reasons this question may come up and provide the answer.
Why Cancel a Debt Posthumously?
The fact is that if you leave your estate to beneficiaries, the executor has the responsibility to ensure those heirs receive what is rightfully theirs. If you have someone paying back a loan, that money is owed to the estate. The executor would move to collect the loan so that the beneficiaries receive the money. But you may decide that your estate is sufficient without placing an extra burden on someone who owed you money. In that case, you can cancel the debt in your will, and the loan will not have to be repaid. Here is an example of why you may choose to do this.
Let’s say you intend to leave your fortune to two sons, but the older boy borrows $50,000 from you as business capital. You have a written contract outlining how he will repay you. If you pass away, you could choose to include a clause forgiving the rest of the loan. This would allow the two boys to split the remainder of your estate evenly. If not, the son with the loan may have to repay his loan or have the balance come out of his share of the inheritance.
Help with Preparing a Will that Expresses Your Wishes
It is up to you to determine what is fair and just in the distribution of your estate when you die. The estate planning attorneys at Petrov Law Firm can help by drafting documents that legally bind your executor and heirs to abide by the decisions that you make while alive and in a sound state of mind. To learn more, call 619-344-0360 today.