Debt Can Affect Estate Planning, Says Attorney with McDevitt Law Office
Fairfax, VA (Law Firm Newswire) October 16, 2013 – Debt can affect retirement plans, says a prominent Virginia estate planning attorney.
Americans entering their golden years should be looking forward to enjoying their retirement and perhaps planning to leave an inheritance to their children. However, many of the baby-boomer generation are finding that things like credit card debt, mortgages, the cost of caring for elderly parents, and providing support for college-aged children, are significant obstacles in retirement and estate planning.
“Debt is a growing problem for older Americans, and it definitely affects estate planning,” said Lisa McDevitt, an estate planning attorney with the McDevitt Law Office in Vienna, Virginia.
A series of new studies conducted by the AARP found that debt has increased for all age groups in over 20 years, but the largest increases were seen with the oldest retirees. Between 1989 and 2010, average debt among people age 75 and older jumped a remarkable 978 percent, compared with a 384 percent increase for people age 65 to 74 and an 89 percent increase for people age 25 to 49. In the shorter term, from 2007 to 2010, 25- to 49-year-olds actually saw their average debt drop, while it continued to climb for older Americans.
Although much of the most troublesome debt involves high-interest credit cards, it is not always a problem of excessive consumption of luxuries. The AARP found that nearly a quarter of people age 50 and older had used credit cards for medical expenses and more than one-third had used credit cards for food, rent and other essential costs.
Debt affects retirement and estate planning in an obvious way: if debts are too high, then people may not be able to afford to retire, let alone leave an inheritance to their loved ones. However, even people who are retiring comfortably and planning to leave a substantial inheritance must consider how whatever debt they do carry will affect their estates.
“Debt always needs to be considered,” said McDevitt. “When a person dies, their debts are paid out of the estate. If someone is planning to provide for some heirs with a trust and others from the remainder of the estate, it must be kept in mind that the value of the estate will be reduced by the amount of the debt.”
Lisa Lane McDevitt
2155 Bonaventure Drive
Vienna, VA 22181