Just how germain is this law?

July 29, 2013 10:02 PM

My SO and I have been living for thirteen years in the house that he owns and has mortgaged in his name only. He has willed the house to me should he die and believes that I would be able to assume the mortgage automatically. The Garn St. Germain Act protects relatives from the bank calling the note when inheriting a property with a mortgage, but what about unmarried opposite sex domestic partners?

My concern is that the bank could call the note and either make me pay off the mortgage or refinance under my own name, which I am not sure I could do considering the fees and down payment likely required. I have seen several pieces of online advice directed at same sex couples warning that the surviving partner might not be considered a relative under this law and might not be able assume the mortgage without refinancing, etc. I am assuming this would apply to non-married heterosexual couples as well but I cannot find this explicitly stated.

We live in Texas if that makes a difference in your answer.

YANML and YANMBanker We will consult them soon but do you have experience with this type of inheritance? How does the Garn St. Germain Act affect non-married domestic partners?

posted by tamitang to Law & Government (10 answers total)

I am not a lawyer, so take this for what its worth, but you may be in a common law marriage if you have been living together for 13 years. Not sure how that affects things, but I would look into that angle.
posted by JohnnyGunn at 10:59 PM on July 29, 2013

Have you seen this American Bar article on Home Ownership for Unmarried Couples already?
posted by batmonkey at 11:31 PM on July 29, 2013 [1 favorite]

I am a Texas resident who bought a house with an unmarried partner, but we later married. In terms of common law marriage, you may be interested in this state of Texas pro se guide on common law marriage to determine whether you might be common-law married (which has other consequences). Common-law marriage has other legal consequences, so handle with care. FWIW, I googled your act on the state law site there and came up with nothing.

Your local bar organization is likely to have a hotline where they'll refer you to a lawyer who'll consult with you for 30 minutes for a very low fee. This might be a good resource for you and your partner to check into for inexpensive advice on what might happen in case of the worst. (ex: Houston Lawyer Referral Service, first 30 minutes for $20. I used to work for a lawyer who received referrals from them occasionally. IANAL, TINLA, etc.)
posted by immlass at 11:40 PM on July 29, 2013

According to this article, written by a lawyer, and its subsequent comments, the note can't be called. It's a federal law, so it applies in all 50 states. One of the comments specifically addresses this, though it refers to Washington State instead of Texas.
posted by fireoyster at 11:44 PM on July 29, 2013

For what it's worth, unless you told people you are married ("represented to others that [you are] married"), usually by way of signing up for insurance policies or leases or other agreements or by filing taxes as a married unit, and you both "agreed to be married," you aren't in a common law marriage. CLMs don't happen solely by the passage of time. Family Code, Chapter 2, subchapter E, section 2.401
posted by fireoyster at 11:54 PM on July 29, 2013 [3 favorites]

I'm curious why, between the two of you, you don't have some kind of policy in place to deal with this. Either a mortgage protection plan or a straight-up life insurance policy with you as the beneficiary. Rather than assuming the mortgage, were your partner to die, the mortgage would be paid off.
posted by DarlingBri at 1:28 AM on July 30, 2013 [1 favorite]

I doubt the law covers you. either get a life insurance policy or start checking around to see what common practice is (ie, do they normally call the note? or let it be assigned).
posted by jpe at 4:40 AM on July 30, 2013

I'm not a lawyer but I like to read law. Since we seem to have a "split" of opinions here, you'll want to consult a lawyer.

After doing some more reading, I'm pretty sure the law does cover you. Here's why:

12 USC 1701(j-3) reads, in relevant part:

(d) With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, ... a lender may not exercise its option pursuant to a due-on-sale clause upon—...

(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; ...

According to Merriam-Webster (and the online copy of Black's Law Dictionary 2^nd Ed), to devise means "to give (real estate) by will." A "transfer by devise" is simply a legal way of saying that a piece of real estate was given ("bequeathed") to someone in a will.

For your purposes, you stop reading at the first comma. You're not legally his descendant nor do both of you hold title to the property in both of your names (creating a joint tenancy or tenancy by the entirety) so those don't apply. However, this law is a list of items separated by the word "or," and since a "transfer by devise" through a will would apply to you, I believe that you would have this benefit.
posted by fireoyster at 8:32 AM on July 30, 2013

You should see a lawyer not only about your question specifically, but also ask about the most advantageous way to do things, tax-wise. A good lawyer with estate planning experience is what you want.
posted by smorange at 8:40 AM on July 30, 2013

I agree with smorange. There are tax implications here for inheriting a property. I'm not a lawyer, but married couples get certain inheritance tax benefits that you may not get as an unmarried couple.
posted by parakeetdog at 11:06 AM on July 30, 2013