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Mortgages and death

Creating an estate plan is an important part of providing for the ones you love after you pass away. While many aspects of an estate plan deal with the proper and timely distribution of assets to beneficiaries and circumventing or minimizing the probate process, estate plans also have great value in protecting your loved ones from debts that you may have accrued in your lifetime. As a general rule, the debt of one person is not passed on to his or her heirs upon death, but is rather settled through the surviving estate.

One issue that is may become problematic if not properly anticipated is how death may affect a family home. Like many other kinds of debt, the mortgage on a home is the responsibility of the person named on the loan, not necessarily the individuals living in the home.

Great news, right? Well, not so fast.

Let's say you and your spouse have lived in your home for the last 12 years, and you pass away suddenly. Your spouse was not named on the loan, and therefore is not personally responsible for the mortgage. This does not mean that the mortgage simply evaporates, allowing your spouse and any dependents you may have to continue living in the home. Your spouse should have the opportunity to assume responsibility for the mortgage, or they may choose to sell the home in order to pay off the remaining balance on the note. They will not, however, be allowed to stay in the home without resolving the loan one way or another.

Clearly, these matters are more complex than they often seem at first glance. Providing for the ones you love can mean a great deal of detailed planning, which should not be undertaken casually. If you are ready to create a strong estate plan for your needs, an experienced estate planning attorney can help you craft the best plan for you and your loved ones.

Source: Findlaw, "Debts After Death," accessed Jan. 20, 2017

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