When a loved one dies leaving property, debts, and a mortgage, and if he did not have a living trust, probate is required to sort everything out. Probate is the process of paying off the deceased person’s final bills and expenses and transferring his property into the names of beneficiaries. Dealing with debts can begin before probate is officially opened.
Mortgages and Probate
A beneficiary who inherits a house or other real estate may be able to assume the mortgage during or after probate. The federal laws of the United States Institution forbids lenders from calling loans due or foreclosing when ownership changes hands due to death. The mortgage must typically be current to qualify.
Dealing With Bills and Mortgages Before Probate
Make a complete list of the decedent’s liabilities, even before the probate estate is opened. It will help streamline the probate process later. Bills and statements you should look for include:
- Mortgages
- Lines of credit
- Condominium Fees
- Property taxes
- Federal and state income taxes
- Car and boat loans
- Personal loans, including student loans
- Storage fees
- Loans against life insurance policies
- Loans against retirement accounts
- Credit card bills
- Utility bills
- Cellphone bills
After you’ve made a list of liabilities, divide them into two categories:
Liabilities that will be ongoing during probate — these will be administrative expenses
Liabilities that can be paid off in full after the probate estate is opened — these are the decedent’s final bills
Administrative expenses include the mortgage, condominium fees, property taxes, storage fees, and utility bills. These must be kept current until the estate closes. To the extent possible, the estate beneficiaries should pay these bills until the probate estate is opened.
The deceased’s final bills include income taxes, personal loans, loans against life insurance and retirement accounts, credit card bills, and cell phone bills. The estate beneficiaries should not pay any final bills out of their own pockets but should wait and let the estate’s personal representative or executor deal with them in the process of settling the estate.
With some liabilities, the beneficiaries will have to make a judgment call as to whether they intend to keep the assets with loans against them. If a beneficiary wants to keep the car or the house, he might want to continue paying down the debt. Otherwise, payments should be made from the estate
Dealing With Bills and Mortgages During Probate
The personal representative or executor of the estate will be responsible for taking over payment of administrative expenses and settling the decedent’s final bills after probate is open. This will include determining which debts are valid and to what extent, then assessing which, if any, of the decedent’s assets, should be liquidated or sold to pay ongoing estate expenses and final bills. If the beneficiaries have continued to pay some or all of the decedent’s bills prior to the probate estate being opened, the personal representative should then reimburse them accordingly, with one exception. If the decedent left real estate to a specific beneficiary in his will and that beneficiary intends to assume or refinance the mortgage against the property, he should not necessarily be reimbursed.
Understanding The Probate Process
Probate is the court supervised process of transferring the decedant’s assets under an authenticated Last Will and Testament or proceeding under the laws of intestacy if there is no Will. Essentially, probate determines the debts of the individual, the value of their assets and how the assets will be distributed. Debts and mortgages can be accounted for before the probate process begins by creating a list of the individual’s debts, liabilities, bills and financial statements. Bills including monthly mortgages, property taxes, car loans, lines of credit and utility bills are a few examples of what should be included, but making a comprehensive list will streamline the process of handling debts after a loved one has passed.
Examining Debts And Liabilities
Generally, debts belonging to the deceased individual fall into two categories of debt: secured or unsecured. Secured debt refers to debt that is backed by collateral in the event that the debtor cannot pay their debt. Mortgages, for example, are classified as secured debt, meaning that if your loved one dies with mortgage payments remaining, the lender uses that home as collateral to pay off the remaining amount. Unsecured debt, on the other hand, is not backed by collateral, and can be more difficult for you to remediate. For example, an individual’s credit card debt is considered unsecured, and after death, the debt is added to other unsecured debt. In addition to debts, liabilities must be considered when enacting your loved one’s estate plan. Certain liabilities, such as administrative expenses, including storage fees and utility bills, may need to be kept current until the estate closes. Other unsecured debt such as personal loans can wait until the executor knows the extent of all debts and liabilities.
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FAQs
What happens to the debt I leave behind during probate?
Whether you have a will or a trust, any debt you have at the time of your death will need to be settled. If your assets aren’t liquid, creditors could force the sale of your property to get paid.
How does the New York probate process works?
Here it is typically sure that during the first month, the decedent’s will is located and then read to the heirs.
What happens to the debt I leave behind during probate?
Whether you have a will or a trust, any debt you have at the time of your death will need to be settled. If your assets aren’t liquid, creditors could force the sale of your property to get paid.
