"Inheriting a Home, and a Loan"
We’ve discussed estate taxes quite a bit on this blog, because it can be a contentious and politicized topic; but while the word “inheritance” has a wealthy ring to it, most bequests come with strings attached. Estate taxes and the ways to “avoid” them are applicable to the minority. According to the Census Bureau, for example, 31 percent of people 65 and up are still paying home mortgages. When your relative or partner leaves a property for you in his or her will, you are responsible for unpaid mortgage payments. For many people, a bequest of property is a financial burden.
In the current housing market, an additional home can mean financial stress. If the home you’ve been left is valuable, the stress of selling isn’t only financial but emotional. Sometimes people want to hang on to a their parents’ home because they grew up in it, or because they think it will be worth much more in a future market.
If you’ve been bequeathed a home “free and clear,” the executor of the will is required to sell stocks, bonds and / or assets to pay off the mortgage. This detail must be written into the will. Another detail grieving relatives might not consider is late mortgage payments. If the deceased was very ill, it’s possible the mortgage was unpaid for up to 90 days, making the home a candidate for foreclosure.
Scenarios like these are not uncommon and require the care and instruction of an estate planning lawyer. Each property is different as is each will, so it is important to understand how to address problems should they arise. The preventative measure of creating a detailed will benefits all parties.