Some people in Kentucky might be concerned about what happens to their debts when they die. Kentucky is not a community property state, and this means that debts in the name of the person who has died do not generally pass to their spouse. This includes student loans. However, if an individual has cosigned on other types of debt, they may still be responsible.

In general, creditors must be paid out of the estate, although there is a time limit in which they can make their claim. The order of priority in which claims are paid is set by the state. Probate involves paying off any of these debts and then passing on what is left to heirs. However, there may be some assets that do not pass through probate. Life insurance policies and retirement accounts are passed using a beneficiary designation.

Some assets, such as a home, might be jointly owned, with the person’s share passing to the surviving owner without going through probate. Assets can also pass directly to beneficiaries if they are placed in a trust.

A trust’s role in protecting estates

A trust may not be the right solution for everyone since they can be costly and complex, but they might be a good way for some people to protect assets from creditors and other potential threats. They can even be used to protect assets from the beneficiaries themselves.

For example, if one beneficiary has a substance abuse problem and might use money irresponsibly, distributions can be at the discretion of the trustee. Because trusts may require legal and financial expertise to administer, individuals might want to appoint a corporate trustee instead of a family member. People who are creating an estate plan may want to consult an attorney to discuss whether a trust or other estate planning vehicles fit their goals and situation.