Death and debt

[swamp]

Jan 6, 2011 12:56:06 GMT -5 CarolinaKat said:

This is my first time actually posting over here on YM so forgive my basic question:

If the estate has no other debts, does a mortgage transfer to the beneficiary along with ownership of the property? Can they keep paying off the existing loan, in other words.

A mortgage is secured debt, so if they want the asset, it comes subject to the debt. But the bank may call hte mortgage due since the original owner is deceased and the heir would have to refinance in their own name.

So the answer is, "it depends."

[CarolinaKat]

Thanks bonnap and swamp ! hopefully I won't have to worry about this for a LONG LONG time!

[Deleted]

Sorry, I clarified my last post. The lender is prohibited from exercising the Due on Transfer Clause if a family member inherits the property. I assume that's what you meant Carolina Kat. I also added where in the act you can find it. I forget how long that is!

[jennml]

Jan 6, 2011 12:07:20 GMT -5 swamp said:

Jan 6, 2011 12:05:14 GMT -5 Savoir Faire-Demogague in NJ said:

I was referring to a CC held in the name of only one spouse.

The answer depends on whether their is a surviving spouse and how assets are titled. Joint accounts between parent and child can be off limits to creditors too.

Doesn't it also matter if it's a community property state? Even If the CC is in just one person's name they can go after the spouse in some states.

[swamp]

Jan 6, 2011 13:52:41 GMT -5 @jennml said:

Jan 6, 2011 12:07:20 GMT -5 swamp said:

The answer depends on whether their is a surviving spouse and how assets are titled. Joint accounts between parent and child can be off limits to creditors too.

Doesn't it also matter if it's a community property state? Even If the CC is in just one person's name they can go after the spouse in some states.

Community property usually has to do with division of assets on a divorce, not on death. For example, my husband my have an interest in a house titled in my name alone if we were to divorce, but if I die, he may or may not have an interest based on what my will says or pursuant to the laws of intestate succession.

But I'm only licensed to practice law in NY (and technically one other state, but I don't practice there) so I can only say for sure for NY.

[CarolinaKat]

Bonnap I was talking about a parent-to-child inheritance, so you made a correct assumption. Thanks again

[tiredturkey]

Other liens can cloud a property title and impede transfer besides the mortgage. In Texas, seniors are allowed to defer payment of their annual property taxes until their death, at which time the taxes fall due. The property can and will be sold to satisfy the lien, unless the heir(s) choose to pay it. Also, accrued and unpaid Homeowners Association dues, municipal liens for sidewalks and utility upgrades and liens for municipal maintenance of the property if the owner has failed to keep it up and mechanics/materialmans liens for remodeling or repair. I know a woman who had a contractor do a lot of work on her home so she could sell it, telling him she would pay him from the sale proceeds. Then she decided to keep the house, he was SOL, so he went to court and slapped a lien on the property. Her DD will have to deal with that when her mom passes away. We also have some homes in our subdivision that have fallen into disrepair, forcing the city to mow the lawn or, in one case, demolish the structure. The liens for these services come due when the properties transfer, whether by sale of inheritance.

[Deleted]

JennML,

I'm assuming your last post refers to Swamp's post #18? I'm a little confused because the OP's original question is "and you both die".

Presumably CC debt was being held jointly as well as the property so the "community property" issue wouldn't come into play. If this were a more complicated estate with some property being held separately as well as debt and other property being held jointly it could get interesting. As I said in my first post Estate State law is driven State by State and there are some interesting scenarios especially in States who allow ownership via tenancy by the entireties (like Virginia). Way too complicated to go into in a message board. Most Trustees should have an initial consult with an attorney licensed to practice law in their State who specialize in Estate Law to avoid stupid and expensive mistakes during the estate settlement process.

[Deleted]

Tired Turkey,

You're correct that ANY transfer of real property is going to be subject to liens filed against it, and I'll go a step further, and say that includes liens which may not be recorded specifically against the property. For example, tax liens are generally recorded in the County in which someone lives, and against the person, not necessarily any property they own. This way if someone owns several properties they may not be able to sell any of them (vs the one that would have the lien recorded against it) without satisfying the lien. Also if someone doesn't own property but tries to buy it in the future, escrow won't close or settlement won't happen until that lien is satisfied. I once had a buyer's escrow get delayed by 30 days because of an unknown County lien. Apparently the husband (at the time of escrow was in his 80s and suffering from Alzheimer's and legally declared incompetent) had made a trip to the emergency room some 20 years before and apparently hadn't paid a $50 hospital bill. The wife didn't know about it and the husband wasn't mentally competent.

These unknown liens make it imperative for heirs to ensure they get title insurance so they don't get nasty surprises!