Debt affects us all. Even sometimes when it’s at its least convenient.
We all want to leave behind some form of legacy to our heirs; and for the most part, that’s typically going to be physical property. But debt can carry over even in death. According to a 2016 report from Experian, 37 percent of consumers who were reported deceased carried an average total balance of $61,554 in outstanding debt—including mortgages. And it’s not always hard to see why. Medical bills add up just as rapidly as mortgage payments do. It’s been estimated that some 43 million Americans are burdened by some form of medical debt on their credit history. By comparison, the entire state of Utah only has less than 3.2 million residents. And at a time in which priorities tend to be rearranged, it’s easy to see the mortgage payments can sometimes fall through the cracks.
What if you have a home with a mortgage when you die? What happens to your property? And who legally owns it?
What Happens To Your Mortgage When You Die?
It’s natural to assume a loan will be cancelled upon the death of a borrower. But more often than not, heirs to real property often find that they wind up inheriting both financial debt in addition to a home. Financial debt they frequently can’t pay off on time.
While you may think by selecting a beneficiary who can afford regular mortgage payments your physical estate can be kept intact, it’s actually more common for an heir to either sell property or let a creditor foreclose upon it. Generally speaking, it’s rare that an heir will suffer any sort of credit loss as a result of your mortgage debt—more commonly, credit damage can be the result of a co-signed loan or a failure of married couples to divide their assets.
If the home is worth more than the debt you owe, the difference goes to any beneficiaries. While this can be subject to the decision of an executor or legal representative, it’s not necessarily a bad idea to sign a clause in your will authorizing its sale for the sake of convenience for a designated heir rather than allowing potential property disputes to arise.
What To Expect When Mortgaged Property Goes Through Probate
If you haven’t clearly allocated your property to beneficiaries in a will or living trust, there’s a very good chance the property will have to go through probate. And one rule of thumb to keep in mind is the larger the debt, the greater the likelihood of having your home sold during the process. The probate process itself can be both lengthy and costly, and one that has the potential to open up old wounds. While Utah follows the Uniform Probate Code (which tends to simplify probate), it still has the potential to be needlessly complicated. Avoiding probate altogether by drafting a revocable living trust can help you avoid the process, but still cost beneficiaries an unwarranted tax burden.
Whether or not you designate a beneficiary through a will or a living trust, the executor’s first priority will be seeing that your assets will be designated to any creditors—no matter how small the debt. And if there’s considerable mortgage, there’s always a strong possibility a lender can force a sale. Consider drafting a list of liabilities alongside your will, including:
- Outstanding bills
- Federal and state income taxes
- Home equity
- Lines of credit
- Loans against any life insurance policies or retirement accounts
- Personal loans
- Property taxes
Divide these liabilities into two categories: ones you anticipate will be active during probate and ones which won’t be as immediate. You might find that by allowing an executor to sell a particularly large policy or investment account immediately on your death, your beneficiaries can use the assets to help pay off your mortgage policies.
Facing The Inevitable
Asset distribution is never something to take lightly. And without due preparation and consideration, your heirs may find they’ll wind up with a lot less than they expected.
More importantly, you need to think of the memory you’ll be leaving behind for your loved ones.
14 Step Checklist To Know What To Do When Someone Dies
It’s never easy to face the loss of a loved one let alone know what to do when someone dies with an estate to manage. In addition to the emotional pain, there’s often legal and financial necessities many people don’t take into consideration. How do you know what to prepare for—especially if you’ve never experienced the death of someone before?
It really is a time of mixed emotions because one must deal with the loss while dealing with the planning and figuring things out side.
Denise Anderson was 44 years old when her mother Gladys died at the age of 72 in 2008. A single mother of two faced with sudden hospital bills, funeral costs and her own grief, Denise decided to forego additional attorney fees when settling her mother’s last will and testament before the state of Utah’s probate courts. It was a decision she lived to regret.
“I assumed it would have been cut and dry,” she explained. “I had spoken with her attorney when she drew up her initial will. All four of us, including my sister, went over the fine print. We agreed on every point. What I was unaware of was the fact my mother had placed an additional home belonging to my father in equity to refinance her mortgage—which had a balance of $140,000 owed to creditors. And that was only the beginning of my nightmare.”
While Anderson’s story may not be an average one, it illustrates a common dilemma many of us face when confronting the inevitable: what to do when someone dies? It’s bad enough coping with the emotional stress. But when compounded with legal practicalities, the crisis of losing a loved one is particularly overwhelming. What am I prepared for? What steps should I take now as opposed to later? What do I need to take into consideration when I’ve never had to take this sort of loss into consideration before? I really need to know what to do when someone dies.
What To Do When Someone Dies
While it may be necessary that you see a licensed professional for grief counseling to answer many of your concerns, following this checklist can help ease the burden of taking care of your immediate responsibilities. Don’t forget, you don’t have to go it alone. You can delegate the responsibilities among family members; in fact it may even bring you closer!
1) Notify The Authorities Immediately
Typically, if the deceased was in a hospital or under hospice care, this responsibility falls to the staff member who first discovers the body. However, if the deceased dies at home or without medical care, it is necessary to call 911 to legally pronounce the body dead. If it exists, have a do-not-resuscitate document ready for the state of Utah (found here) or notify authorities ahead of time.
2) Arrange For Transportation Of Your Loved One
Be aware of any arrangements that need to be made for an autopsy or organ donation prior. If no autopsy is necessary, a mortuary or crematorium can be contacted for admission. Be aware that legally, both must be able to give an estimate of necessary costs.
3) Notify Friends And Family
Be aware that this will likely be one of the most strenuous and emotionally grueling parts of the process. Be prepared to give as much honest information as you have, but keep it short and simple. Arrange for face to face communication if you can.
4) Arrange For A Caretaker For Pets, Children And Other Dependents
You’re likely going to have emotionally too much on your plate as you will any additional physical burden. Even if it’s only temporarily, this should likely be a task you delegate to someone you trust.
5) Notify The Employer Of The Deceased
If your loved one was still working. Ask about details of remaining pay, life insurance, benefits or any necessary details you or your family may need to know.
6) Arrange For Proper Burial, Cremation Or Funeral Services
It’s more common than not that arrangements will be stipulated in any will or testament. Still, the prospect is likely going to be very emotionally taxing for you. Try to have a close friend or family member on hand to contact proper facilities and accompany you (they can also be beneficial in helping you compose an obituary.)
7) Contact Religious, Military Or Fraternal Associations
Oftentimes, if a loved one was an active member they can help offset the cost of burial through subsidized benefits (or provide actual funeral services themselves.) There may also be additional benefits such as grief counseling, pensions and charitable services they can offer you.
8) Assess The State Of Their Physical Property
In the case of a parent, if this was a home you grew up in there may be some very personal memories attached, so again; this may be a task you should be accompanied with by a friend or family member. Sort through mementos. Clean up any trash, throw out food, collect mail… the physical state of the property can play a specific role in the administration of their will.
9) Locate And Keep On File Your Loved One’s Will
As well as any pre-planned or pre-paid funeral arrangements and necessary information for the death certificate. As in the example we gave earlier, you should also contact their attorney (or hire your own) to discuss the specifics of the will to avoid any complications further down the road.
10) Obtain A Death Certificate
These will be provided to you at a funeral home. You will need multiple copies for probate courts, government entities, insurance agencies, banks and utility providers.
11) Register The Will For Probate In The District Court Of The Deceased’s Particular City Or County
Please note that by Utah state law, a probate case may not be filed for at least five days after death; and it must be filed within three years.
12) Appoint An Executor Of The Estate
Whose duties may include:
- Collecting money owed to the estate or paying taxes and mortgages on property owned
- Managing the estate and making repairs where needed
- Filing estate income tax returns and submitting problems to the court
- Distributing the estate in accordance with the will or the law
- Submitting a final accounting statement
- Establishing any necessary bank accounts for distribution of funds
13) Contact The Following:
- A trust and estates attorney to transfer assets
- Police (to have them periodically check vacant property for security reasons)
- Any of your loved one’s investment advisers for information on holdings
- Their bank for account information
- A life insurance agent for claim forms
- Social Security (800-772-1213; www.ssa.gov) and other agencies from which they received benefits to stop payments and ask about survivor benefits
- Utility companies, to change or stop service, and postal service, to stop or forward mail
14) Arrange For The Potential Sale Of Physical Property
This can actually be one of the more time consuming tasks of estate liquidation. In the case of inheriting a home, it can take months (and sometime years) after the estate has been executed to transfer property, arrange for mortgage payments and make necessary repairs. You may want to discuss the option with other family members in order to gauge their input.
Hopefully you now have a clear checklist to follow to give you the confidence to know what to do when someone dies. The pain of grief is a universal burden; but one that we all endure and interact with in unique ways. The process of losing a loved one is painful enough; but when it comes to arranging final details, you don’t want any additional burden.
It’s better to accept (and cooperate with) a loved one’s final wishes than to put too much strain on their end of days. But it’s also better to be prepared for necessary legal requirements. And there’s no reason why you shouldn’t be able to cooperate with both. We questions and welcome them for any reason.