My mother's home is worth around $400k, but I'm pretty sure that she has multiple mortgages on the thing and it may be underwater at this point. She also has some stocks and other funds that my brother and I are likely to inherit when my mom passes. My mom has said that she is leaving the home to me and my question is whether I will get the house value or whether I will have to pay the mortgage(s) off so that the gift will be worth nothing or less than nothing.
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The Editor, Mark Bernardin, is an attorney living in MA. Please send your suggestions or comments to: TheEditor@malawforum.com
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The answers and information provided on this site are for informational purposes only and are NOT substitutes for professional legal advice. Before making legal decisions, you should discuss your specific circumstances with an attorney.
Inheriting a house "free and clear"
The answer to your question will likely depend on how your mother has set up her estate and what her estate planning documents say. An oversimplified answer follows: If the will says that you should inherit the house "free and clear" then the executor will be required to sell other assets of the estate and attempt to pay off the mortgages. If there is no such language in the will, then you will also "inherit" the mortgages. Federal law prohibits banks from attempting to enforce the due-on-sale clause in this situation so, if you want, you can take the house with the mortgages and attempt to pay them off. I suppose this option might be appealing if the home has some non-monetary value to the person who inherits it, such as a family home where she grew up.
When the time comes, you should contact a probate attorney for guidance on this issue. You should keep in mind that there may be other issues associated with a home in this situation. For example, are the property taxes up to date? Are there any other liens on the property? It can get complicated. Good luck.