If you pay your parents’ mortgage, do you have to tell the loan company? Even if the home was inherited, you may run into problems down the line if you wait to inform the loan servicer.
Q: The home I live in was owned by my parents who both passed away several years ago. I have always made the payments and continue to do so. I have never informed the mortgage company of the passing of my parents.
But, what would happen if I do tell them? My parents’ will stated that at the time of the death the home would be mine, but if it isn’t paid for what happens?
A: Nothing should happen when you tell the mortgage lender that your parents died and you inherited your parents’ home. Years ago, Congress passed the Garn-St. Germain Depository Institutions Act. That law would prevent the lender from calling the loan. In essence the law states that children and spouses are protected from lenders when the survivors inherit the home.
From that standpoint you should be safe. On the other hand, the IRS generally requires a person to own a home to deduct interest payments and real estate tax payments. While the will gives you the home, the home is still in your parents’ name. It’s probably time for you to take action and have the title to the home changed from your parents’ name to your name.
We assume you’ve also continued to purchase homeowners insurance but if some calamity happens to the home, the people insured are your parents. For you to deal with the insurance company after a casualty, you’ll probably find yourself between a rock and a hard place. And, for you to deal with the lender, you’ll encounter problems there as well.
Neither the lender or the insurance company knows you exist and they can’t deal with you if you are not the owner of the home, on the mortgage or on the insurance policy.
At this point, we’d like to see you put the home in your name. We’d like to see the insurance policy in your name as well. We know that you don’t “own” the house legally now, but we’re concerned that you might have difficulty getting the home titled into your name without some effort.
While your parents told you that you’d get the home, you need a legal document to prove that. Usually, that document is a will. In the will, your parents would have designated you as the person to inherit the home. If they didn’t have a will, then your state’s laws would govern who would get the home. If you have siblings, you and your siblings would likely inherit the home in equal shares. In this case, even with a will, the property would likely wind up in probate court.
In probate court, you’d present the will (if you have one) to the court. An executor of the will gets approved (assuming the will provided a name of a person to be the executor of the will) and that person could then handle the affairs of your deceased parents. Without a will, the process would be similar but the court follows the laws in the state to designate a person to represent the estate of your parents and property would get distributed as provided by the laws in your state.
Without knowing where things stand specifically, we can’t imagine the problems you might face trying to transfer title from your parents names to your name. If the property had been placed in a trust and you were named the beneficiary of the trust, putting the home officially into your name should be easy.
Please consult with a estate attorney who might be in a position to review your facts and give you a course of action.