An important part of your estate planning strategy is ensuring that you make things as easy as possible for your loved ones after you pass away. One thing that’s important to understand is what happens to your mortgage when you die.
The good news is that your loved ones may not be responsible for any loans they didn’t have anything to do with, and you can make plans to keep your loved ones in the home if that’s what you, and they, desire. In this article, we will discuss how a mortgage is handled in a probate proceeding in Florida.
If, after reading this article, you have additional questions about the Florida probate process, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA. Call today at 561-656-0200 or fill out our online contact form.
What Happens to Debt When You Die?
When you as the borrower pass away, things can change, but perhaps not as much as you may think. Your mortgage still does exist and will need to be paid off. Additionally, once you pass away, you may have loved ones who live in the house or have an emotional connection to the home.
Accordingly, your surviving loved ones can handle your mortgage in a few ways. Here are some options:
1. Make the Mortgage Payments
It’s vital that you make the appropriate arrangements to have your monthly mortgage payments made when you die. By doing this, it prevents your mortgage company from penalty fees or starting the foreclosure process.
This can be accomplished by having your spouse and/or executor make the probate mortgage payments while they are settling the remainder of your estate.
Automatic bill paying can accomplish this goal quite easily, provided that funds are available. Some financial institutions or mortgage companies freeze your assets upon your death, so it’s important that you make arrangements for the payments to be made.
2. Bequeath Your Home to a Relative.
Essentially, your estate is going to be responsible for paying off any debts, but when it comes to real estate, things can get interesting.
Under federal law, your mortgage company must allow any family members to take over your mortgage if they inherit residential property. Your heirs do not need to prove they can repay the mortgage before they take the mortgage over.
Also, your heirs are not required to keep your mortgage. They can refinance the loan or pay it off in its entirety.
3. Sell the Home.
If your heirs can’t afford to make the payments or don’t want the home, they can always sell it.
However, you should make your heirs aware if you have a reverse mortgage on the property. That is because a reverse mortgage sets up an entirely different set of circumstances.
In a reverse mortgage, you don’t make monthly payments. Home Equity Conversion Mortgages are the most common types of reverse mortgages, and they have to be paid off after the last borrower on the loan dies or moves out of the property. After that, your heirs will get a due and payable notice from the reverse mortgage lender.
If your heirs want to keep the home, they will have 30 days to pay the loan balance or 95% of the home’s appraised value, whichever is less. If your heirs decide to sell the house, the proceeds from the sale will go to the lender as repayment for the loan.
Be Sure to Prepare for Your Probate Mortgage
By engaging in some basic estate planning, you can make things easier for your loved ones. Speaking with your estate planning attorney so you can make your wishes known, and ask them how to make it happen.
In some cases, a Last will and Testament can accomplish this goal. There are also additional methods available to you such as a life insurance policy, ownership options, and cash liquidity.
Work with Estate Planning Lawyers in Palm Beach
Knowing what will happen with your probate mortgage is an integral part of planning for the future. Making arrangements early can ease much of the emotional burden your successors will face when handling the affairs left after you are gone.
At Doane & Doane, we help you determine the best tools to plan for life’s eventuality. Let us help you. We at Doane & Doane combine big firm resources and experience with the personal touch of a small, boutique firm. We pride ourselves on offering the kind of one-on-one attention that clients at big firms often do not enjoy.
Remember, estate planning is about much more than just giving away property. It is an act of love and kindness, with the ultimate goal of providing for the future financial security of your loved one. At Doane & Doane, our tax and estate professionals help people plan for retirement, consider various types of wills and trusts, make provisions for loved ones, figure out future child support, and minimize tax liability. Experienced wills and trusts attorneys know which tools to use to get the best results for their clients. Our lawyers can help you determine which tools are best suited to your specific circumstances.
After almost two decades of practice, we have earned the reputation as a prominent West Palm Beach tax and estate planning law firms. In particular, we understand that estate and probate matters involve a great deal of emotion. We are privileged to help clients on such important matters, and we genuinely care for and support our clients and their families.
We hope that all of our clients, friends, and business associates enjoy the hospitality of our firm’s legal staff. Doane & Doane serves clients in the communities along Florida’s Gold Coast and Treasure Coast, including Palm Beach, Broward, Miami-Dade, Indian River, St. Lucie, and Martin counties. For a free consultation and to get to know our firm, please give us a call at 561-656-0200.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.