How to Protect Inheritance from Creditors
If you find yourself with a sudden inheritance, you might feel overwhelmed! While this large chunk of change can make a huge impact on your finances, it's important to learn how to protect inheritance from creditors who might try to collect on your sum. Let's say you want to use your funds to finally buy a house, but you're concerned that your past debt will whittle your inheritance down to nothing. What are the rules of inheritance, and how can you use them to your advantage? Let's go through the hypothetical steps.
Check Your Credit
Is your credit score perfect? Less than perfect? Non-existent? Before you jump the gun, it's important to check your credit score to be sure. You might be surprised if you've been expecting the worst. Everyone can check their credit score one time per year for free from each of the following bureaus: Experian, Equifax, and TransUnion. While these records should be up-to-date, unpaid medical debt doesn't appear until it is sent to collections. Keep that in mind if you are wrestling with any costly hospital visits. And be sure to examine your credit report carefully. Even the best businesses make mistakes, so it's crucial to report any inaccurate listings with the bureau to prevent a simple error from costing you the prime credit score that you deserve.
Weighing Your Options
Now that you know your credit score, you are better prepared to make a game plan for the future. If your credit score is in the prime range, you're good to go! Feel free to apply for a mortgage the traditional way and find the house of your dreams. But if your credit score isn't ideal, you have a few options. If your credit score is pretty dire, you might only qualify for high-interest loans that burn through that inheritance quickly. You might find that waiting and improving your credit score can save you money in the long run. If your credit score is merely less than perfect, then you have to weigh the pros and cons for yourself. Consider consulting a financial advisor and explain that you want to learn how to protect your inheritance the right way.
Managing Your Debts
So, you know your credit score and you're creating a plan to build your future. But what about the past? Your old debts might cause a problem when trying to move forward. Since you've acquired a copy of your recent credit history, you have a dated list of all of your debts from the past. But keep the following in mind:
- There is a statute of limitations on old debts. That means your 25-year old debts can no longer be collected through the court system.
- Only debts within a 7-year time period will appear on your credit report, so don't be surprised if you don't see that student loan from a decade ago.
- Recent debts not only appear on your credit history report, but they are also fair game for collection in the courts. This can affect your inheritance money if you have racked up a lot of debts recently.