What happens to my mortgage if I die?

In meeting with clients, a common question that surfaces is what happens to my home if I pass away and still owe a lender money.  The easy answer is that the mortgage still needs to be paid, whether by a surviving joint owner of the property, personal representative of the estate of the decedent, or by the trustee of a trust if the property was owned by a trust.  This is the case because the mortgage follows its collateral, the real estate, and not the person that has passed away.

Unless there is a surviving joint owner who is also on the mortgage, the estate created at the death of the borrower has an obligation to pay off the mortgage.  Most lenders have language in their mortgages and notes that call for immediate payment upon the death of the person that took out the mortgage.  However, the reality of the matter is that most estates do not have the liquid funds available to pay off the mortgage debt in full.  The personal representative of the estate will first use any funds in the estate to pay off the mortgage or at least keep the payments current.  In most instances, unless someone is continuing to live in the home, the house will then be sold in order to discharge the mortgage debt, if possible.  In this case, if there are any excess funds from the sale, then they will be placed back into the estate and treated like other estate assets.   If after the sale, part of the mortgage debt is still remaining, lenders may be able to apply to the estate for further payment, but with the collateral gone and the borrower deceased, the debt is typically satisfied after the sale of the real estate.

Alternative arrangements - Some people take out a life insurance policy that is effectively deemed mortgage insurance.  Its purpose is to discharge the mortgage in the event that the owner/borrower passes away prior to the mortgage being discharged.  This is a relatively inexpensive way to insure that your beneficiaries are not burdened with an encumbered property should someone die prematurely.  Also, some lenders are willing to alter notes and mortgages to allow surviving children or others to assume the mortgage at the death of the original borrower. This allows heirs to keep the property and start paying off the mortgage themselves.  In either case, it is a more desirable scenario than being forced to sell real estate in order to satisfy a mortgage obligation.

For more information, please visit my website (www.daviaulaw.com), e-mail me (nick@daviaulaw.com), or call my office (508-797-3010).

Also, visit my elder law blog at http://worcesterelderlaw.blogspot.com/

Why Should I Plan My Estate?

Being in this line of work, I understand that no one wants to talk about their own mortality or the importance of planning for the unexpected.  However, by procrastinating in implementing at least a basic estate plan, you run the risk that your intended beneficiaries may not receive what you would want them to receive; whether due to administration costs, taxes, costs of long-term care or bickering among heirs.

These are just a few reasons why estate planning is so important, no matter the size of your estate.  It allows you to decide who will be in charge and to ensure that your property will go to the people you want, in the way you want, and when you want.  A more comprehensive plan can permit you to save as much as possible on taxes, court costs and attorneys' fees; while affording your loved ones the opportunity to mourn and grieve without being burdened with administrative matters.

All estate plans should include, at minimum, three important estate planning instruments: a durable power of attorney, a health care proxy, and a will. The first is for managing your property during your life, in case you are ever unable to do so yourself. The second is for making medical decisions in the event that you’re incapable of making them yourself.  And, the third is for the management and distribution of your property after death.

“Plan in advance to give your loved ones a chance, or procrastinate and leave it up to the state!”

For more information on basic estate planning, please visit my website: www.daviaulaw.com or contact me at nick@daviaulaw.com or (508) 797-3010.

Visit my elder law blog as well: http://worcesterelderlaw.blogspot.com/

General Durable Power of Attorney – The Most Important Tool in One’s Estate Planning Arsenal

General Durable Power of Attorney – The Most Important Tool in One’s Estate Planning Arsenal
When someone hears or mentions the term, estate planning, a Will is usually the first thing that comes to mind.  While a will is an important part of a comprehensive estate plan, a power of attorney is generally the most important document one can have in place.

Too many times, I have encountered situations where I meet with a client and his or her loved one hasn’t executed a power of attorney.  Without having such a document in place, one can be left without a decision-maker for his or her finances.  Furthermore, that loved one is now forced to petition to the probate court to become his or her loved one’s conservator.  This is an expensive and time consuming process.  Not only that but once the probate court is involved, that person’s business is public record and can be accessed by almost anyone.  Lastly, a probate court judge has the responsibility of appointing someone to act as the Conservator.

All this can be avoided by executing a General Durable Power of Attorney.  This is a document that allows an individual (known as the “principal”) to choose an agent (the “attorney-in-fact”) to handle his or her financial affairs should the principal become incapacitated.  Executing a power of attorney is very inexpensive and could save your loved ones the time, money and frustration associated with probate court proceedings.

As I always like to say, “Plan in advance to give your loved ones a chance or procrastinate and leave it up to the state!

For more information, please visit my website: www.daviaulaw.com, e-mail me (nick@daviaulaw.com) or call me at (508) 797-3010.