What happens to your mortage when you die??

fastfredracing · 12-28-2009, 01:41 PM

As some of you remember , a week before Christmas, my girlfriends dad passed away. Real bummer. We are now beginning to sort through all of the stuff one has to go through in this situation. 2 years ago, when he started slipping mentally , and no longer could handle his own financial affairs, My gf went to the lawyer, and had the house put in her name, so we already own it. There is a small balance left on the mortgage which is still in her dads name. The contact at the bank is out for the next week, and we don't have a meeting with the lawyer for another 2 weeks.
I, having never been through this scenario, am not sure what to expect.
Will the bank just turn the mortgage over to her?? She is the executor of the estate, or will we have to take out a new loan on the house??. Not worried, we both have good credit, and the ammount owed on the home is small , about 1/6th of the houses value, just not sure what to expect at this point
We are not even sure if it was an actual mortage, or a home equity loan. We know for a fact that the home was paid off in the 80's, but he borrowed against it to buy himself out of a divorce at one point 10 years ago
Any help/ advice appreciated.

vash · vash's Garage

dont know...but sorry for your GF's loss. (and your's too)

imcarthur · imcarthur's Garage

I would imagine that the debt stays with the house since it was the collateral for the mortgage. Did you change the title on the house? I would think the debt would have traveled with it since it should be shown as a lien on the title.

I am not a lawyer. And condolences.

Ian

stomachmonkey · 02:03 PM

Went through this with my fathers estate for pretty much the same reason.

1st thing is find out if he had Mortality Ins to cover it. If yes then it's a matter of supplying Death Certificate and it's a write off.

Don't speak to the bank before you speak to the Attorney.

Don't do anything until you speak with the Attorney.

This does not need to be handled today.

You can make the payment in his name till you get all your ducks in a row.

Sorry for your lose.

Rot 911 · 12-28-2009, 03:26 PM

The bank will have a claim against the estate for the amount of principle still owed on the house. It will be up to your girlfriend to figure out where the money will come from be it insurance, other assets of the estate, loan, etc.

stomachmonkey · 12-28-2009, 03:53 PM

Was thinking on the way home.

Was the house actually titled to her? Or is she just a trustee or have power of attorney?

Not sure about PA but the diference could be a tax liability.

There are reasons for doing both. If you expected that the father would live for a while and might need a facility at some point then it makes sense to do that and try to preserve the estate. But it may expose you to capital gains tax if the house is now sold.

If she had POA or was a trustee then she could legally manage the affairs and upon inheriting the estate be exempt from capital gains if total value is under $500k.

KurtV? Did I get that right?

widgeon13 · 12-28-2009, 03:55 PM

as the executor of the estate there should be no problems, the bank just wants their legal payment, nothing else.

Dueller · 12-28-2009, 04:09 PM

If the house was transferred to her by deed, the house is not property of the estate. However, the liability for the mortgage is a liability for the estate secured by collateral owned your gf (the house). The bank is used to this scenario and will work with you. Continue to pay the mortgage from his assets until the estate is closed.

Unless his estate was valued at $2.5M or more, there will be no federal estate tax liability in most scenarios. Where the tax is comes up is upon sale of house by gf...if it was conveyed to her during his lifetime she assumes his basis (value at time he purchased it) as opposed to a "stepped up" basis (value at time he died) for purposes of figuring capital gains. Howeever, if she is occupying it as her primary residenxce capital gains can likely be avoided if she ever sells.

One thing to be careful about is knowuing whether he drew any Medicaid (as opposed to Medicare) benefits before his death. Sometimes they will have a lien on estate assets (particularly residence real estate) to repay those benefits especially if there was a transfer within 3 years of death. Hopefully not the case.

Lawyer should explain above and more in more detail.

Sorry for your loss.

imcarthur · imcarthur's Garage

That's different. In the frozen north, an estate is assessed a probate tax ($5/thousand up to $50K & $15/thousand thereafter). Excluding insurance, pensions with beneficiary, joint tenancy, foreign real estate. But no capital gains because inheritances are not taxable income. Interesting.

Ian

Dueller · 12-28-2009, 04:41 PM

Quote:

Originally Posted by imcarthur

That's different. In the frozen north, an estate is assessed a probate tax ($5/thousand up to $50K & $15/thousand thereafter). Excluding insurance, pensions with beneficiary, joint tenancy, foreign real estate. But no capital gains because inheritances are not taxable income. Interesting.

Ian

No tax up to $2.5M (currently)...a $10M estate is taxed at about 55% IIRC

The capital gain would only kick when she sold the property in the OP scenario.

tcar · 04:51 PM

Quote:

Originally Posted by fastfredracing

My gf went to the lawyer, and had the house put in her name, so we already own it.

Does that mean that YOU are on the title too?

That would be unusual, since it sounds (by GF) that you are not married.

Have her talk to the Lawyer BEFORE she talks to the bank!

fastfredracing · 12-28-2009, 07:00 PM

No, I am not on the deed or title. I guess I worded that incorrectly , but we have been here for 13 years. The property was deeded to her about a year and a half ago. We were digging through paperwork tonight, and found the loan doucments and it is indeed a mortgage. She is not planning on selling, this is where she grew up, and this is where she wants to live , that is why we moved here. No worries about the 2.5 million. No medicaid benefits were paid out either . The mortgage is due in a couple of days, and we weren't quite sure how to handle it at this point. The lawyer did call later this afternoon , and explained to do exactly as you said Dueller, keep paying through his assets. His wishes were that we were to get the house, and the rest gets split up among other siblings, so we don't want to drain the estate to pay off the mortgage. We had pretty much assumed the mortgage some time ago any how.
Thanks for your help and condolences , some good guys here on pelican!

futuresoptions · 12-28-2009, 07:07 PM

Sorry that I can't help with your question Fred, but sorry for your family's loss...

SteveinTO · 12-28-2009, 09:08 PM

Do a title search and find out who actually has current title to the house (like a Deed of Trust). An attorney or title company can assist. If the bank has the house as collateral for a home loan (mortgage) or a home equity line, that obligation will have to be cleared or the bank could, after exhausting other remedies, foreclose. Without knowing more, I doubt a bank would lend w/o collateral.

svandamme · svandamme's Garage

Over here, we normally have an insurance for the debt left if the mortgage loaner dies before it's payed off. It's actually mandatory by law in Belgium... If something happens to me, my mortage is payed off by the insurance.. so my family doesn't have to deal with it.
costs me about 20 euro's a month (for a 140K/30 years mortgage costing me 729 euro's a month)

Do people get those with mortgages in the US? does it even exist, if so, is it common?
Maybe your GF/s dad had something like that? Worth checking...

pwd72s · 12-28-2009, 11:37 PM

Quote:

Originally Posted by svandamme

Over here, we normally have an insurance for the debt left if the mortgage loaner dies before it's payed off. It's actually mandatory by law in Belgium... If something happens to me, my mortage is payed off by the insurance.. so my family doesn't have to deal with it.
costs me about 20 euro's a month (for a 140K/30 years mortgage costing me 729 euro's a month)

Do people get those with mortgages in the US? does it even exist, if so, is it common?
Maybe your GF/s dad had something like that? Worth checking...

When Cindy & I had a mortgage such insurance wasn't mandatory. However, we did by "term" life insurance policies on both of us. The house would have been paid for if either of us died.

stomachmonkey · 12-29-2009, 06:02 AM

Quote:

Originally Posted by svandamme

Do people get those with mortgages in the US? does it even exist, if so, is it common?
Maybe your GF/s dad had something like that? Worth checking...

Yes they have that product here. Had it on my last house. A lot of folks are not even aware of them, at least from my experience.

I suspect most people use term products to pay off. I like to have both especially considering how cheap Mortality Ins is.

Joeaksa · 12-29-2009, 06:34 AM

Sorry to hear this.

Even more reason why I am glad that everything large that I own is now held in a private trust. Makes thing so much easier when someone passes or life changes.

targa911S · 12-29-2009, 07:48 AM

It's PA. they will figure out a way to screw ya.

berettafan · 08:56 AM

With all due respect to everyone responding you need to do the following:

-Read the parts about 'my condolences'.
-Ignore the rest, in it's entirety, and go see a good local atty.

it's not that everything posted here is wrong....but that you will not understand the context for the stuff that is correct. of considerable importance is the fact that there may be local forms to be filed (Register of Wills) and you will need an atty for that. if you can find an atty with Dueller's apparent knowledge of both the tax AND legal aspects of an estate it would be most helpful. bear in mind this is NOT always the case.