Q: My friend just passed away and left his wife in a difficult financial situation. Her name is not on the house mortgage and none of the cars. My question is will she be responsible for the mortgage payments? She is upside down and will lose the house.
A: My condolences on your loss.
Is your friend’s wife named on the mortgage note even if she is not on the title to the property? Did your friend leave a will? Is his widow prepared to move? She probably needs to speak with an estate attorney soon in order to figure out what’s going on.
If the widow is not on the mortgage note, then she should not be held responsible for the mortgage payments. She can move out of the house and let it go back to the bank. But if she wants to continue to live in the home, she can continue to make the loan payments and keep the loan in good standing.
But if she decides to walk away from the house and there are other assets in your friend’s estate, then the bank may try to lay claim to those assets. That’s why she needs an estate attorney to help guide her in this situation.
While she may not be liable to the lender for the loan, your deceased friend’s estate may have an obligation to pay off the lender. Before assets from the estate can be distributed, the debts of the estate must be paid off.
Having said that, if some of the assets are in joint accounts or in trusts, upon your friend’s death, those assets would have transferred automatically to the designated beneficiaries. But in the case of the house, your friend incurred that debt personally and in that case any assets that were in his name at the time of his debt might have to be used to pay off the lender under some circumstances.
If there was a joint tenancy with right of survivorship, the house would automatically vest to the surviving tenant and the mortgage lien would not encumber the property depending on what state you live in. Especially, if the the decreased was the sole debtor. The lender would have a right to the property while they were still alive but upon their death, the deceased interest is extenginshed along with the lender’s.