What Happens To A Mortgage When Someone Dies
What Happens To A Mortgage When Someone Dies
Posted At 10:00h
by Phelps LaClair Law
When a person dies, the mortgage debt they owe becomes part of their estate. What happens next is complicated. It depends on several factors, such as whether or not there was a cosigner on the loan and whether the deceased
. If you are the spouse of the deceased or the beneficiary, you can assume the mortgage. Let’s take a closer look at what happens to a mortgage when someone dies, with scenarios for several different circumstances.What Happens to a Mortgage If There Is No Will?
If the deceased did not have a will, the court will appoint an executor for the estate. Then the assets will be distributed according to the laws of
intestate succession
–this means that the deceased’s closest relatives, like their spouse or children, will inherit. If the heirs wish to keep the property the executor may use existing assets, such as the life insurance policy, to pay off the mortgage. Otherwise, they can sell the property to pay off the mortgage and distribute the proceeds to the heirs.SCENARIOEver since her father passed away, Lucy has been living with her elderly mother and caring for her so she doesn’t have to leave her own home. Lucy’s mother passed away without a will. Lucy talks to her brother and sister, who have no interest in the house, and they agree to let Lucy buy out their share of the property. If you are the beneficiary of a will or the closest living relative of your parents, you can inherit their property. If you want to assume the mortgage of your parents, you must first notify the lender that the borrower has died. Inform them that you legally inherited the home and that you want to assume the mortgage. You will need to provide documentation for both the death as well as the inheritance. You must act quickly, as you usually only have 30 days to complete the process.
However if you parents die with a large amount of debt it could prevent you from inheriting their property. The executor may have to sell the property to pay off other outstanding debts. Taking steps like helping your parents set up an
asset protection trust
before they pass away can help you keep the family home in the family.
SCENARIO
After a long battle with cancer, Jake’s father finally passed away. He died with a large amount of medical debt. He also had the foresight of purchasing
mortgage insurance
. The mortgage will be paid off by the policy, so Jake can inherit the family home. If the surviving spouse was not listed on the loan, ownership must be transferred. It is important to take simple estate planning measures like naming your spouse the beneficiary of your bank accounts.
If your spouse passes away suddenly, they will be required to make payments. If they cannot make payments, it does not matter if they have been listed as co-borrowers or are in the process to assume the mortgage. They risk foreclosure if they do not. Estate planning can help you make sure that your spouse gets access to your finances right away, instead of having to wait through
probate.SCENARIO
Jane’s husband, Ted, was killed in a motorcycle accident. Jane is not a signatory to the mortgage on their house, which is in Ted’s name. Ted purchased the house soon after they were married. Jane will inherit all assets acquired by Ted during their marriage because Arizona is a community property
state. She can take on the mortgage and keep her house.
Estate Planning Experts in the Phoenix ValleyWhether you need help navigating the probate process after a loved one passes away, or you’re ready to start the estate planning process so you can protect your family, we understand what you’re going through. When you have an expert guiding you, legal matters like this are much easier. Contact us today to schedule a free consultation on estate planning
. Photo by
Lotus Design N Print
on Unsplash used with permission under the Creative Commons license for commercial use 3/5/25.
