Is a beneficiary of an estate responsible to pay for the mortgage?

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Is a beneficiary of an estate responsible to pay for the mortgage?

I have a Will. If I die and have a mortgage on a house, and the house is worth less than I owe, will the person that inherits the house be responsible for the mortgage?

Asked on April 29, 2011 under Estate Planning, Illinois

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The person who inherits your home always has the option to refuse the gift or bequest or a specific inheritance.  Aside from pure refusal, you can make it so the person can take subject to the mortgage as opposed to requiring the person assume the mortgage. You should sit down with an estate planning attorney and go over all of your assets (from big items like homes and cars and boats) to furniture and bank accounts, retirement accounts, savings accounts, money market accounts and the like. The estate planning attorney will go over your state's laws, federal inheritance and gift tax laws, the best way for your beneficiary to inherit your home and whether you should have a will, a trust or both.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Yes; a borrower's obligation to repay the mortgage does not end with the death of the mortgagee. If there is a mortgage remaining on a home at the time the owner passes away, whomever inherits the home must continue to pay the mortgage--and that is true whether there is equity in the ome or the home is underwater (either way, the bank must be paid). If the mortgage is not paid, the lender can foreclose on the home. If the home is underwater and the beneficiary does not want it, he or she can disclaim receiving the home--no one can be forced to inherit--and won't need to pay a mortgage on a home that is then worth less than the loan.


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