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.
"Being in the financial planning industry for over 35 years and focusing on end of life planning, we’ve become accustomed to seeing first-hand what families go through after the death of a loved one. Many times, there is added pain and frustration because they just don’t know what to do." Michelle Braddock, Co-Founder, My Life and Wishes Inc.
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