As people go through life, they often help friends or family members by loaning them money. While alive, they typically do not forgive such loans to teach loved ones about the value of paying their debts. However, when people approach their final years, many reconsider forgiving debts such as personal loans.
For people wishing to forgive their debts while imparting a lesson about the wisdom of debt repayment, estate planning might offer a solution. Your first step is learning what you can and cannot do with your will in California.
Laws are geographically specific
Most estate planning laws look similar across the country. However, there some differences from state to state. If you live in California, it is in your best interests to learn about these laws to ensure that your estate plan documents contain no invalidating errors.
In most cases, it is possible to forgive intrafamily debts or loans to a friend in your will. However, if your estate is insolvent or without expendable assets when you die, your debtors may still be required to pay off a loan. A probate court may have no choice other than to enforce the repayment of personal loans to cover your formal debts left behind.
If you and your spouse loaned money to someone jointly, it might not be possible to forgive the entire debt in your will. Your spouse would have to agree to forgive their portion of the loan, too, and should do so in writing.
California allows you substantial latitude when creating tailor-made solutions. However, it remains critical to familiarize yourself with estate planning and probate law before making any changes to your documents.
