Home Mortgages After Death
Average life expectancy rates are increasing, and so are the circumstances in which mortgages are being carried into retirement and outstanding balances remain after death. Planning for property ownership and debt responsibilities before passing them on to loved ones is more important than ever.
Transfer of Mortgage Ownership
What happens to personal property or real property such as a home after a person dies is complicated. If there is a will and the home is designated to a person in the will, that person (the heir) receives the home. If a person dies without a will then intestate law applies, which follows familial lineage guidelines. This means the home is designated to a spouse, state-registered domestic partner, child, parent, sibling, grandparent, aunt and uncle or niece and nephew, in that order, depending on state law.
Sometimes a will is not enough. The decedent’s property first must satisfy any remaining debts, even if the mortgage is paid off. If the decedent has enough liquid assets to pay off the mortgage, the bank will “forgive” the debt and the heir will receive the home without debt owed. However, if there are not enough liquid assets to pay off the mortgage after death, the heir can either take over the loan, refinance the loan in the heir’s name, or perform a reverse mortgage.
Deed, Title Transfer, or Co-Signers
A person’s name on a deed, title transfer or mortgage co-signer will come into play legally after death, so eliminate confusion for your loved ones and ensure the names on the will match those on the deed and mortgage.
Why is this important?
Death is an emotional time. Adding the stress of what happens to the home, debts, and personal property can all be eliminated by creating a My Life & Wishes plan. It’s your life, but it’s their future. Make sure it’s a happy one.
For me the ultimate act of love is planning ahead. I call it Death Etiquette™: Death Etiquette™ - Being thoughtfully prepared for one’s own passing. Accordingly, making things easier for family and loved ones by leaving clear and concise instructions in regard to your final wishes for funeral desires as well as location and access to important documents and accounts. Further identifying who should be responsible for carrying out the final wishes and ultimately settling all the final affairs. It is a simple act which saves loved ones Stress, Time and Money…. the things which divide families!
Let’s face it, life and our stuff, is significantly more complicated than it was 20 or 30 years ago. Technology has made it so. Technology, while simplifying our lives immensely, has made for a very complicated departure.
Have you ever been the decision maker for someone else’s choices? Not the little choices, like what outfit to wear, or where to eat dinner. The big decisions. Where a person wants to be buried. How he wants to die, surrounded by family, or with medical professionals there. What kind of care she wants for her physical body - cremation, burial, body donation. Where the money goes after death.
Preparing for downsizing can be a difficult thing to do. For us, it was simple. For my mother, it was not such an easy transition.