What document would typically include the terms of how debts should be settled by an estate?

The Last Will and Testament is the formal legal document in which an individual outlines how their estate and affairs should be managed after their death. This document specifies the distribution of the decedent's assets, but it also typically includes provisions for the settlement of debts.

When someone passes away, their estate may have outstanding debts, and the will can dictate how these debts are to be handled. It may name an executor, who is responsible for paying off these debts before any distributions are made to beneficiaries. This principle is crucial for ensuring that creditors are paid in accordance with legal and financial obligations before the estate's assets are distributed.

In contrast, a power of attorney is relevant to an individual's financial and legal matters while they are still alive, but does not dictate how debts are handled posthumously. A living trust also manages assets but operates while the individual is alive and may not necessarily outline debt settlement in the way a will does. An advance directive focuses on healthcare decisions and does not pertain to estate settlement. Thus, the Last Will and Testament is the correct document for detailing how debts of an estate should be settled.