If you have a mortgage on your home, then you would be right to wonder if a designated heir can inherit the home after you pass away and what that means for the mortgage. The Wills, Trusts & Estates Prof Blog recently tackled this issue in "What Happens When A Person With A Mortgage Passes Away?"
The answers to what happens to the mortgage and home after you pass away depends on to whom you leave the home in your estate plan.
If the person who inherits the home is closely related to you, then by law they can take over the mortgage. A spouse or child, for example, can elect to inherit the home and continue paying the mortgage.
However, as a practical matter if they are unable to continue the mortgage payments, then obviously they will have to do something else with the home.
You might consider in your estate plan ensuring that the heir will have enough other funds to pay off the mortgage.
If your designated heir is not a close relative, then he or she does not automatically get to take over the mortgage. Normally, lenders will let the person inheriting the home refinance the mortgage if he or she wishes to do so and is able to pay.
If the lender is unwilling to refinance and the home must be sold, then the remainder of the mortgage will usually be due at the time of the sale.
Consult a Cincinnati estate planning attorney to discuss your options. Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage a Cincinnati estate planning attorney.
For more information about estate planning, probate or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526).
Reference: Wills, Trusts & Estates Prof Blog (Nov. 23, 2015) "What Happens When A Person With A Mortgage Passes Away?"