- May 17, 2011 at 12:44 am #25265
my daughter is 100 percent beneficary…so does she just keep the loan in my name? can i put her on the deed? she cant get a loan her house just foreclosed.May 17, 2011 at 1:43 am #122991
This is what will happen:
1. You estate, not your daughter, inherits the debt. As long as the payments are made on time, the bank will not force a sale or refinance or “call the note”…this is a myth that is often spread in the mortgage industry….the bank doesn’t care who pays it as long as it’s paid.
2. Your daughter does directly inherit the deed along with the estate. However, the home must go through probate before it can be sold or refinanced (if she chooses to), so if she isn’t going to have the money to make the payments, you can add her name to the deed now, and that allows you to skip probate. All she’ll need to show the clerk of court is a death certificate to remove your name.
There are pros and cons to keeping the mortgage in the name of the estate.
Pros: She will never be legally responsible for the debt, so if the mortgage cannot be paid, this will not affect her credit in any way…this is another myth…you never, ever, directly “inherit” debt.
Cons: If the mortgage is not in her name, she cannot claim the tax deductable interest on her taxes…this is one reason why some refinance.
Hope that answers your question!May 17, 2011 at 2:25 am #122992
Some other considerations. If she inherits the home or its equity (sold to pay of the loan), she gets a stepped up basis at time of your demise, so little or no tax would be due from her.
If you add her to the deed, it would be considered a gift and you should file a gift tax form. Her basis on that half would be half of your purchase price and improvements. That could have capital gains tax implications if she sells it without living in it for at least 2 years.
If you transferred it entirely to her name, your loan likely has a due on transfer clause that would make your loan(s) immediately due and payable if/when your lender finds out. Although, they may not push the issue as long as they are getting paid and proper insurance is being maintained. If the loan is not paid, they could still foreclose, since their lien would be senior to the property transfer. And your daughter’s cost basis as a gift would be your purchase price and improvements.May 17, 2011 at 2:40 am #122993
She’ll have to finance it and if you’re upside down she’ll have to pay the difference to keep it. Get life insurance to pay it off for her.
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