Hyden, Miron & Foster, PLLC Law Blog

Tuesday, April 17, 2018

What Happens to Your Mortgage When You Die?

Very few people enjoy thinking about death, especially their death. However, planning for your death is something you should do for your loved ones. Having an estate plan ensures that your wishes are carried out after your passing, but it also protects your loved ones. Without a valid will, intestate laws in Arkansas determine how your property is distributed. In other words, the state has the final say instead of you or your family.

Before our Arkansas estate planning attorneys examine what happens to a mortgage upon your death, it is helpful to understand what happens to the title to your home after your death.

Who Gets My Home When I Die in Arkansas?

In your will, you can direct that your home should be given to your spouse, children, friends, charity, or any other person or entity. However, the bequest is subject to the state’s dower and curtesy laws. Under AR Code §28-11-301 (2016), if you predecease your spouse and children, your spouse is entitled to a one-third interest in any lands you own for his or her life unless that right has been previously waived. Therefore, even if you leave your home to your children, your spouse can still claim a one-third interest in the home.

Another factor to consider is how your home is owned if you and another person own title to the home. Under Arkansas law, you can own a home with another person as tenants in common, joint tenants with rights of survivorship, or tenants by the entirety. If you own your home with another person as tenants in common, you can bequeath your interest, and only your interest. If you own a home with someone as joints tenants with rights of survivorship or tenants by the entirety, then you cannot bequeath your interest in the home. Your interest will pass automatically, by law, to the surviving co-owner(s) regardless of what your will states. 

What Happens to the Mortgage on the Home?

When you die, the mortgage debt is not forgiven. The mortgage company continues to have a valid lien on your home. Therefore, if the loan payments are not paid according to the terms of the mortgage note, the lender can foreclose on the mortgage and take the home from your heirs. Therefore, someone must continue to pay the mortgage payments after your death or the home will be lost.

In most cases, the spouse, children, or other heirs who inherit the home are responsible for making the mortgage payments. If you had a co-borrower, that person is still obligated to pay the entire mortgage payment regardless of whether he or she lives in the home. The co-borrower’s credit rating will be negatively impacted if the loan payments are not made on time each month.

The mortgage company cannot require that your heirs pay the entire balance of the loan in full if they continue to make the regular monthly payments. However, some home equity loans may be subject to payment in full. You should check the terms of your home equity loan to ensure that your heirs are not caught by surprise after your death.

Do I Need an Estate Plan?

Yes, you need a comprehensive estate plan, especially if you have a mortgage on your home. With an estate plan, you dictate how your property is divided, but you can also make arrangements to help your loved ones pay mortgage payments after your death, so they do not lose the home.

Call today to set up an appointment with an Arkansas estate-planning attorney at Hyden, Miron & Foster, PLLC for more information and to discuss options to protect your family in the event of your death or incapacitation.

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