After the passing of a family member, you may become the recipient of a parcel of real estate, such as a home, an apartment, a trailer home, or some open land. Yet, with every windfall comes serious obligations. Consider the following issues that you will likely face:
When someone passes away (decedent) and owns property solely in their own name, the inheritance can only be transferred through a court proceeding called probate. Probate is the process by which the estate of a deceased person is settled under court supervision. There is a Personal Representative who is in charge of the probate proceedings. This person is usually nominated by the deceased person’s Last Will & Testament (“Will”) and is typically the surviving spouse or an adult child. If there is no Will, the Personal Representative is appointed by the court. The Personal Representative is obligated to collect and value the assets of the deceased person. They have to pay the bills, taxes and later distribute the assets to the family members, or any beneficiaries listed in the Will. If you have inherited a house in Florida, either through a Will, or by being the next of kin, you will have to go through the probate proceedings in order to transfer title to your name.
You may be able to keep the decedent’s mortgage intact when you inherit real estate. Usually, upon the transfer of ownership to real estate which is encumbered with a mortgage, there is a due-on-sale clause contained within the contractual documents that created the mortgage. This means the entire loan is billed rather than just the installment payment. However, recipients of real estate incident to the death of the owner do not have to worry about such a clause. Federal Law trumps the lenders contractual right to call a mortgage where the recipient of the property is a relative of the decedent-borrower or the recipient was a joint tenant on the deed of the property with the decedent-borrower prior to death.
A reverse mortgage is a loan available to homeowners, 62 years or older, that permits them to convert the equity in their homes into cash. While a reverse mortgage was a great source of income for the decedent prior to death, that money has to be repaid to the lender. Thus, the real estate with a reverse mortgage will not be owned by you free and clear. Instead, the real estate will be encumbered by a mortgage that needs to be repaid prior to calling that real estate your home.
If your name was not on the original homeowner’s policy, continuing to pay the bill will not automatically extend coverage. Be sure to notify the insurance company to list you as the new “named insured” to make sure that any claims you file will be covered.
Usually, the original policy will continue for a defined period after the homeowner’s death, giving you time to find a new policy. Review the policy carefully or contact the insurance company directly to be sure of your deadline. Typically, coverage will remain in effect for the remainder of the policy period.
It is a mistake to make any assumptions about how the home insurer will honor claims by heirs after a homeowner has died. Although the company may keep the current policy in place until it reaches its expiration date, it is better to get that commitment in writing.
Keep in Mind
People who inherit property are often looking for a quick way to sell the property. Thus, it is important to remember:
- When selling inherited property, time is of the essence. Especially when a mortgage is involved. If you are unable to keep up with the mortgage payments, you have a few short months before foreclosure proceedings begin.
- Before you list the property, you must ensure it has already been transferred to your name, usually through a probate court proceeding.
- If the next of kin is a minor child, a guardianship must be established through the courts because a minor cannot inherit real estate property or a mortgage. Someone must be appointed their legal guardian to complete the real estate transfer.
OC Estate & Elder Law will help you navigate the real estate process from start to finish. This can often be done without any out of pocket legal fees. We will assist with the probate process to transfer ownership of the property to your name. We can put you in touch with knowledgeable and proactive realtors that can find a buyer very quickly. The probate and listing process can be started simultaneously without any initial expensive legal fees. Contact OC Estate and Elder Law at (954) 251-0332 or firstname.lastname@example.org, to learn more during our free consultations.