dealing with mortgage debt from a deceased parent
June 21, 2010 1:17 PM Subscribe
Please help me figure out a way to help my parents with the enormous debt they've been saddled with after my grandparents' passing. Or at least some positive words about a light at the end of the tunnel.
Hi everyone. I received some stressful news this weekend and don't know where to begin. This year I lost both my maternal grandmother and grandfather. My mother is their only child. Before my grandmother died, she tried to settle her debts (credit card and otherwise) by taking out a second mortgage on our home (where she, my grandfather, and both of my parents all live). My parents were not aware of her enormous debt, or the fact that she tried to remedy it in this manner before her death. Now that she is gone my parents are faced with the burden of this mortgage. I know very little about financial matters, and my parents are rather tight-lipped about money (which they do not have a lot of). My basic understanding is that after a person passes, certain debts do not carry over to their children, but unfortunately mortgages do. Perhaps there's nothing to be done other than incremental payments and life long debt. But being my parent's only child, and the one to probably take on this debt one day (in addition to my college loans etc) I am trying to find some way to be hopeful about this situation. My throwaway email is throwaway5678@gmail.com Any advice or support on this would be greatly appreciated.
Hi everyone. I received some stressful news this weekend and don't know where to begin. This year I lost both my maternal grandmother and grandfather. My mother is their only child. Before my grandmother died, she tried to settle her debts (credit card and otherwise) by taking out a second mortgage on our home (where she, my grandfather, and both of my parents all live). My parents were not aware of her enormous debt, or the fact that she tried to remedy it in this manner before her death. Now that she is gone my parents are faced with the burden of this mortgage. I know very little about financial matters, and my parents are rather tight-lipped about money (which they do not have a lot of). My basic understanding is that after a person passes, certain debts do not carry over to their children, but unfortunately mortgages do. Perhaps there's nothing to be done other than incremental payments and life long debt. But being my parent's only child, and the one to probably take on this debt one day (in addition to my college loans etc) I am trying to find some way to be hopeful about this situation. My throwaway email is throwaway5678@gmail.com Any advice or support on this would be greatly appreciated.
We would really need more data to be helpful even with broad speculation here.
- Is this a second mortgage running concurrently with the first? How long is left on the first?
- Is there any reason to expect you would need to take on this debt before its paid off in the next 30 years?
- How much is an enormous debt? 15,000 is different than 50K is different than 150K.
Realistically, this is your parents matter to deal with and there's little you can effect directly here. However, you could suggest they consult first with an attorney and then possibly with a financial/mortgage advisor about this, and go as far as to book an appointment you go to yourself, asking one of them to go with you.
The key is not to panic. You need to get a handle on the numbers, get legal advice early, and then look at what options you have. Selling the house or bailing on the mortgage are last ditch but viable options. It isn't hopeless, it's just that the future may look different than you thought it would.
posted by DarlingBri at 1:33 PM on June 21, 2010
- Is this a second mortgage running concurrently with the first? How long is left on the first?
- Is there any reason to expect you would need to take on this debt before its paid off in the next 30 years?
- How much is an enormous debt? 15,000 is different than 50K is different than 150K.
Realistically, this is your parents matter to deal with and there's little you can effect directly here. However, you could suggest they consult first with an attorney and then possibly with a financial/mortgage advisor about this, and go as far as to book an appointment you go to yourself, asking one of them to go with you.
The key is not to panic. You need to get a handle on the numbers, get legal advice early, and then look at what options you have. Selling the house or bailing on the mortgage are last ditch but viable options. It isn't hopeless, it's just that the future may look different than you thought it would.
posted by DarlingBri at 1:33 PM on June 21, 2010
You definitely need a lawyer. I certainly doubt that the mortgage debt would be on their shoulders unless they cosigned the loan for the grandparents. The mortgage debt should belong to the estate.
posted by Jupiter Jones at 1:35 PM on June 21, 2010
posted by Jupiter Jones at 1:35 PM on June 21, 2010
I'm not a lawyer, but as I understood things, the debt doesn't go to your parents, but to the estate. So if the decedent owned a house (even part of it), the creditor is entitled to it.
Your parents should not find themselves loosing money, but may not inherit as much as they thought.
But I'm not a lawyer, so go call one.
posted by Brian Puccio at 1:39 PM on June 21, 2010
Your parents should not find themselves loosing money, but may not inherit as much as they thought.
But I'm not a lawyer, so go call one.
posted by Brian Puccio at 1:39 PM on June 21, 2010
My basic understanding is that after a person passes, certain debts do not carry over to their children, but unfortunately mortgages do.
No type of debt can be inherited.
posted by geoff. at 1:39 PM on June 21, 2010
No type of debt can be inherited.
posted by geoff. at 1:39 PM on June 21, 2010
No type of debt can be inherited.
They are living in the house, and presumably they inherited the house. They could probably give up the debt by giving up the house. If they want to keep the house they may need to pay all the mortgages.
It would be helpful to know who owns the house, how the mortgages are structured, etc.
posted by alms at 1:49 PM on June 21, 2010 [2 favorites]
They are living in the house, and presumably they inherited the house. They could probably give up the debt by giving up the house. If they want to keep the house they may need to pay all the mortgages.
It would be helpful to know who owns the house, how the mortgages are structured, etc.
posted by alms at 1:49 PM on June 21, 2010 [2 favorites]
The mortgage only carries over if your parents want to continue living in the house. Otherwise the debt goes to their estate, which would sell the house to try to settle the debt.
You need a lawyer.
posted by peanut_mcgillicuty at 1:50 PM on June 21, 2010
You need a lawyer.
posted by peanut_mcgillicuty at 1:50 PM on June 21, 2010
My basic understanding is that after a person passes, certain debts do not carry over to their children, but unfortunately mortgages do.
Nope. Assuming your parents live in a first world country, they do not have to accept the inheritance.
posted by malp at 1:50 PM on June 21, 2010
Nope. Assuming your parents live in a first world country, they do not have to accept the inheritance.
posted by malp at 1:50 PM on June 21, 2010
Yes, you have not provided enough data for us to give you useful advice beyond "consult an accountant" or perhaps "consult a lawyer". Can you follow-up with more information?
posted by Justinian at 2:56 PM on June 21, 2010
posted by Justinian at 2:56 PM on June 21, 2010
My basic understanding is that after a person passes, certain debts do not carry over to their children, but unfortunately mortgages do.
Nope. Assuming your parents live in a first world country, they do not have to accept the inheritance.
First, I'm very sorry for your losses.
Second, IANAL, and IANYL, but I've been through this.
Let's be clear about this -
When a person passes, all their assets & debts go to the estate. Debts are obligated to be paid out of the assets of the estate. Once debts have been paid, the remaining assets can be distributed according to the terms of the will.
If debts are greater than the assets, then there is nothing left to inherit.
The family has the following options on the mortgage:
1) Pay off the mortgage with the assets of the estate - this option is usually not feasible.
2) Continue to pay the existing mortgage
3) Re-finance the mortgage under new terms, which might be more advantageous or better suited to the family's current situation.
4) Walk away from the house, let the bank claim it.
There is no expectation that the current mortgage has to be paid RIGHT NOW.
There's also time to figure this all out. Just make the mortgage payments as currently required until the dust settles, the grief becomes a little easier to deal with, and the family decides what the next steps are.
posted by swngnmonk at 3:00 PM on June 21, 2010 [1 favorite]
Nope. Assuming your parents live in a first world country, they do not have to accept the inheritance.
First, I'm very sorry for your losses.
Second, IANAL, and IANYL, but I've been through this.
Let's be clear about this -
When a person passes, all their assets & debts go to the estate. Debts are obligated to be paid out of the assets of the estate. Once debts have been paid, the remaining assets can be distributed according to the terms of the will.
If debts are greater than the assets, then there is nothing left to inherit.
The family has the following options on the mortgage:
1) Pay off the mortgage with the assets of the estate - this option is usually not feasible.
2) Continue to pay the existing mortgage
3) Re-finance the mortgage under new terms, which might be more advantageous or better suited to the family's current situation.
4) Walk away from the house, let the bank claim it.
There is no expectation that the current mortgage has to be paid RIGHT NOW.
There's also time to figure this all out. Just make the mortgage payments as currently required until the dust settles, the grief becomes a little easier to deal with, and the family decides what the next steps are.
posted by swngnmonk at 3:00 PM on June 21, 2010 [1 favorite]
And furthermore, consult a lawyer - someone who practices either family or estate law.
posted by swngnmonk at 3:01 PM on June 21, 2010
posted by swngnmonk at 3:01 PM on June 21, 2010
Lawyers, yes. But here are a few other things to consider before the pens get uncapped:
1) How is your parents credit score? How is your credit score? Mortgages are at a pretty good rate right now and it's possible you can refinance. The rate you get will depend on the size of the loans you're carrying and the value of the house.
2) How old are your parents? It may be possible to reverse mortgage the house (more info on reverse mortgages).
3) Play hardball with the creditors. Nobody wants to be carrying inventory right now and they may be willing to work with you (especially the second mortgage company whose rights to the assets are likely subordinated to the primary creditors).
Lastly, it sounds like your grandmother did a pretty smart thing. The interest on credit card debt is way worse than the interest on mortgages, and this was probably the best thing she could do for the estate given her situation.
If you're willing to give some more details (size of debts, rates, etc) I can try to help you further with this.
posted by AmitinLA at 4:42 PM on June 21, 2010
1) How is your parents credit score? How is your credit score? Mortgages are at a pretty good rate right now and it's possible you can refinance. The rate you get will depend on the size of the loans you're carrying and the value of the house.
2) How old are your parents? It may be possible to reverse mortgage the house (more info on reverse mortgages).
3) Play hardball with the creditors. Nobody wants to be carrying inventory right now and they may be willing to work with you (especially the second mortgage company whose rights to the assets are likely subordinated to the primary creditors).
Lastly, it sounds like your grandmother did a pretty smart thing. The interest on credit card debt is way worse than the interest on mortgages, and this was probably the best thing she could do for the estate given her situation.
If you're willing to give some more details (size of debts, rates, etc) I can try to help you further with this.
posted by AmitinLA at 4:42 PM on June 21, 2010
>it sounds like your grandmother did a pretty smart thing
Maybe not. She converted personal debt, that was only her responsibility, to debt that accompanies the house, whoever inherits it.
posted by yclipse at 5:32 PM on June 21, 2010
Maybe not. She converted personal debt, that was only her responsibility, to debt that accompanies the house, whoever inherits it.
posted by yclipse at 5:32 PM on June 21, 2010
> She converted personal debt, that was only her responsibility, to debt that accompanies the house, whoever inherits it.
It appears in many, if not most, cases that credit card debt passes onto the estate: (one, two, three).
posted by AmitinLA at 6:34 PM on June 21, 2010
It appears in many, if not most, cases that credit card debt passes onto the estate: (one, two, three).
posted by AmitinLA at 6:34 PM on June 21, 2010
You should consult an attorney, most probably one with experience in Elder Law. It's too late now for estate planning, unfortunately, but there may still be things that can be done in probate, depending on what assets have what ownership and/or beneficiaries.
If grandma had consulted an elder law attorney, she would probably have been advised on how to set up the house title and mortgage in such a way that it was separated from the credit card debt before or on her passing. There are other ways to protect assets and isolate liabilities, and you and your parents will eventually want to work this out amongst yourselves. But you need to do it before someone's untimely death.
posted by dhartung at 8:04 PM on June 21, 2010
If grandma had consulted an elder law attorney, she would probably have been advised on how to set up the house title and mortgage in such a way that it was separated from the credit card debt before or on her passing. There are other ways to protect assets and isolate liabilities, and you and your parents will eventually want to work this out amongst yourselves. But you need to do it before someone's untimely death.
posted by dhartung at 8:04 PM on June 21, 2010
This thread is closed to new comments.
posted by Rosie M. Banks at 1:26 PM on June 21, 2010 [1 favorite]