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How Your Home Mortgage Fits Into Your Estate Plan


Early on in the estate planning process, you will discover that many of the decisions you make about your estate will be based on your best interests and those of your descendants while you are alive.  As the old saying goes, estate planning is about planning for life, not just planning for death.  Therefore, if you are wondering whether you should start working on your estate plan before you retire and while you still owe money on your home mortgage, the answer is a resounding “yes.”  In fact, deciding when to pay off your mortgage can be an important estate planning decision.  A Central Florida estate planning lawyer can help you decide how to make your house and your other valuable assets bring the greatest amount of happiness and stability to you and your family.

What Happens to the House and the Mortgage When a Borrower Dies?

What happens to loans and debts when the borrower dies depends a lot on the type of debt.  For example, federal student loans automatically disappear upon the death of the borrower, regardless of whether the borrower was a student or a student’s parent.  For most consumer debt, including credit card debt, the creditor has a chance to claim the amount owed, or a portion of it, from the borrower’s estate during probate.  Home mortgage loans are different, though.  Whoever inherits the house also inherits the mortgage.

Therefore, if you still owe money on your home mortgage, think about how this outstanding debt will affect the person who inherits your house.  Consider the following scenarios:

  • You have left your house to your son in your will, and he inherits your house, mortgage and all. This means that he has instantly become a homeowner, with a bigger mortgage than he could have qualified for on his own.  He can make the mortgage payments, refinance to extend the term and get a monthly payment he can afford, or sell the house.  In any case, you have given him a valuable asset.
  • You have left your house to your son in your will, and you pay off the mortgage during your lifetime. Your son inherits a valuable asset unencumbered by debt.
  • You specify in your will that the house is to be sold during probate, and the proceeds are to be divided among your son and the children of your siblings in the percentages you specify. Your son and other members of your family inherit money that they may use as they choose.

Which of these situations seems the most desirable to you depends on the circumstances of your family.  An estate planning lawyer can help you tackle your mortgage debt if you decide that getting your house paid off suits your estate plan best.  If you are fine with one or more of your heirs inheriting your mortgage, then you can allocate your income in other ways.

Contact an Attorney for Help

An experienced Clearwater estate planning lawyer can help you think about your debts from an estate planning perspective.  Contact William Rambaum for a consultation.



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