What Happens to Your Property If You Die With A Mortgage?
Whether you are creating your own estate plans or a relative has recently passed away, dealing with estate planning matters can be confusing and overwhelming. If you are like most people, you are probably filled with questions. One of the most pressing questions is what happens to a deceased person’s financial obligations. For example, if someone still has a mortgage when they pass away, what happens to the property? Does the executor sell the property? What if there are other individuals still living in the home?
What Happens to Debts When Someone Passes Away?
Unfortunately, a deceased person’s financial obligations do not disappear when he or she dies. When someone passes away, all of their assets and liabilities become part of their estate. This includes any real estate property, such as a home or land, that they owned as well as the debt associated with the property. The executor of the estate is then responsible for managing the deceased person’s assets and liabilities and distributing them according to the terms of the will or estate plan. If the person who passed away had a will, this document will specify the executor of the estate. If the person did not have a will, the probate court will appoint an executor.
Who Takes Over the Mortgage?
If a married person passes away and his or her spouse was a co-borrower or co-signer on the mortgage, he or she takes over the mortgage. If a last will and testament names an heir to a home, the heir has the option of taking over the mortgage. For example, consider a situation in which a grandfather leaves his home to his adult grandson. In this case, the grandson has the right to assume mortgage payments and take ownership of the home. The grandson also has the option to sell the home.
It can take several months to several years to settle an estate. Executors and heirs should plan carefully and ensure that mortgage payments are still being made on the home during the probate process to prevent the home from falling into foreclosure.
How Can an Heir Afford Mortgage Payments?
When creating an estate plan involving a mortgage, it is important to consider how heirs will afford mortgage payments. One popular option is to use a payable-on-death account that will provide the executor and heirs with access to money to pay bills. POD accounts are useful because they do not have to go through probate before people can access the funds.
Should We Sell the Home?
People who inherit a home may wonder whether it is best to sell the home. The answer to this question depends on many factors, including the market, the home’s value, and the mortgage balance. If there is more one heir, selling the home and dividing the proceeds may be a good way to distribute the home’s value to the heirs. Selling the home may also be the best option if there is no one willing to assume the mortgage and take on responsibility for maintaining the home.
Call Us for Help
When someone passes away with a mortgage, their heirs have the option of taking over the mortgage. Alternatively, heirs may decide that the best option is to sell the home.
The Naperville estate planning lawyers at the Gierach Law Firm can help you evaluate your options and build an estate plan that meets your family’s needs. Call our office today at 630-756-1160 for a confidential consultation.
Please note: These blogs have been created over a period of time and laws and information can change. For the most current information on a topic you are interested in please seek proper legal counsel.