When someone dies, their loved ones must handle their home and any mortgages that they had. Here’s what you need to know if you’ve suffered a recent loss.
When a homeowner dies, someone will have to deal with the home and any outstanding mortgage loans. The deceased homeowner may have left multiple heirs behind, each of whom have their own ideas about what to do with the home. Depending on the circumstances, you may need to speak to an attorney who specializes in real estate or probate law.
An experienced home mortgage professional can help you sort out the current financing of the home and, if needed, find a new mortgage so you can pay off your relative’s loan. Here are some common situations that occur along with options that may be available to you.
How to Leave a House to Someone in Your Will
Leaving a house to someone (or multiple people) in your will can be simple or very complicated depending on several factors. While some families should consult with an attorney, here are some basic important considerations:
You may write your own will without a legal representative. You do not need a lawyer to write a will for you. You may simply state that you are leaving the ownership of the home (with its address included) to a clearly-named individual. Ensure your heirs are aware of the will and its location.
Finalize the will with witness signatures or a notary. Simply writing a will and stashing it under your bed doesn’t make it legally binding. See Nolo.com’s advice for gathering witnesses and/or a notary to sign the will. The witnesses must meet certain criteria.
Name an executor/administrator. After you pass, this person will ensure the directions in your will are carried out correctly.
Name beneficiaries. Use full names to define how the home should pass. You may give the home to multiple individuals (joint ownership), but if you have a mortgage on the home, check with your lender to ensure you are not exceeding the limit of co-owners.
Step 1: Did your relative have any estate planning documents?
One of the first questions you should ask when an elderly relative dies is if they had an estate plan. If so, they might have left instructions on what to do with the home. Hopefully they let someone know where to find their estate planning documents. If not, you may have to search through the home.
Estate planning is a complex field that can involve lawyers, financial professionals, and others. But any of the following documents will outline what happens with the home in a clearer way than without them.
Photo by Ken Mayer from Flickr [Creative Commons]
Last Will and Testament
A will is a set of instructions from a person, known as the “testator,” about what will happen to their belongings after their death. The will should name someone who will serve as the administrator of the estate. The administrator is responsible for identifying all of the testator’s assets and debts, paying their debts, and distributing their assets according to the terms of the will.
Intestate Succession in Texas
If a person dies without a legally valid will, living trust, or TODD, a process known as “intestate succession” determines what happens to the house. Someone must file a petition with the local probate court seeking appointment as the administrator of the estate.
Texas law provides a list of heirs, with the spouse having the highest priority. If a person dies without a spouse, the administrator continues down the list until they find someone to take over, often in this order:
Aunts and uncles
If, for example, an elderly widowed person with four children dies without a will, their assets would go to their children in equal (one-fourth) shares.
One of these parties must file a probate petition asking the court to appoint them as the representative of your estate. Their job will be to identify your assets, distribute them among your heirs, and report back to the court.
Step 2: The Probate Process
First, what does it mean to probate a house? Simply put, it means a court is undergoing a legal process to determine who gets to make decisions about their deceased relatives house. Even if your relative has a will, the house may still need to go through the probate process.
The administrator named in the will must file a probate petition. The court will examine the will and hear any challenges to the will’s validity. It may schedule hearings to check in on the administrator’s progress. Once the administrator has completed the process of distributing your assets, the court will close the case.
Some counties have courts specifically designated to handle probate matters, while courts in other counties handle a variety of cases, including probate. According to recent data, probate cases account for around a tenth of Texas’ civic caseload.
FAQs about Homes in Probate
1. Can you live in a house during probate?
If you already live in the house, it’s generally acceptable to continue living in the home while it’s in probate. This applies to renting tenants. If you do not already live in the home, it’s typically best to wait to move in until an administrator has been declared after the probate process.
2. How do you sell a house in probate?
If you are the administrator of the house named in your relative’s will, you are generally allowed to begin advertising and showings for the property whether through a real estate agent or not. However, being named as the administrator in the will doesn’t prevent the property from entering probate. If the home is in probate, the actual sale and transfer of deed must wait until the court settles the probate process. This may take several months which may discourage buyers.
3. Can a house be foreclosed while in probate?
Yes, a house can be foreclosed while in probate. Mortgage payments are still due. The probate process will define who is responsible for these payments, but in the meantime, relatives must determine who pays and how much.
4. Can I put my house in a trust to avoid probate?
Yes, a living trust identifies beneficiaries at your death. A living trust accomplishes what probate proceedings would do ahead of the time you pass away. The assets will actually be titled in the name of the living trust while you’re still alive, thereby easily passing the asset to the named beneficiaries.
What happens if a deceased homeowner has multiple heirs?
A home may pass to multiple heirs by various means. A will could leave it to multiple people. A living trust could name multiple beneficiaries. A TODD could name more than one grantee. An intestate succession case could result in a group of siblings inheriting their parent’s house in equal parts.
If the deceased person did not leave any specific instructions about what to do with the house, the new owners will have to figure it out on their own. They might not be able to agree. That’s when things often get interesting. As co-owners of the home, they are all responsible for mortgage payments, property taxes, and other expenses.
Problems with Having Multiple Heirs on a House
These are some examples of problems that occur when multiple heirs disagree on the course of action concerning a deceased relative’s home. These should serve as reminders as to why your will should written by a professional with detailed instructions for all your assets.
Any major action affecting the property, such as selling or mortgaging the entire parcel, requires every owner’s agreement.
If some owners refuse to pay their share of the property tax, the other owners may be stuck with the bill.
An owner who seeks to partition the property may be able to force the sale of the entire property. Many families have lost family farms because one tenant in common sold their share to a development company or other business. The buyer filed a partition action and got the court to order a sale.
Texas enacted the Uniform Partition of Heirs’ Property Act, which protects tenants in common from the forced sale of heirs’ property. Other problems may still present themselves, though, such as the difficulty of managing property owned by multiple tenants in common.
What happens with a mortgage when someone dies?
If the home still has a mortgage, any heir or heirs who want to keep it can talk to the deceased relative’s lender about their options. It might be possible for them to assume the loan. If not, they will have to refinance into a new loan. Either way, they will be making payments on the home.
The home secures the mortgage, and will continue to secure the mortgage no matter what happens with the homeowner’s estate. “Securing the mortgage” means that the home is being used as collateral in case the mortgage payments are not paid. This protects the mortgage lender. If no one makes payments on the deceased person’s home, it will be foreclosed.
» READ MORE: All About Home Foreclosure
A reverse mortgage presents a different issue. If the homeowner took out a reverse mortgage, they received periodic payments from the lender over time. The balance of the mortgage went up instead of down. The amount paid by the lender will most likely come due when the borrower dies. Selling or refinancing the home is likely the only way to cover that debt.
Get guidance from mortgage professionals that care.
If you have recently lost a loved one, dealing with their mortgage might be the furthest thing from your mind, but it’s an issue that will need your attention sooner rather than later.
The home mortgage professionals at the Wood Group of Fairway are here to gently help you transition. Answer a few easy questions and we’ll reach out about the best options for you!