Overland Park Attorney

Your Mortgage and Your Estate - How are they Interacted?

You probably hope to have your mortgage paid off long before you pass away. However, in your estate plan you should plan for what will happen if you die before your mortgage is paid off.  Oops!

If you have a mortgage on your home, then you would be right to wonder if a designated heir can inherit the home after you pass away and what that means for the mortgage. The Wills, Trusts & Estates Prof Blog recently addressed this issue in "What Happens When A Person With A Mortgage Passes Away?"

The answers to what happens to the mortgage and home after you pass away will depend on to whom you leave the home in your estate plan.

If the person who inherits the home is closely related to you, then by law they can take over the mortgage. A spouse or child, for example, can elect to inherit the home and continue paying the mortgage.

However, as a practical matter if they are unable to continue the mortgage payments, then obviously they will have to do something else with the home.

You might consider in your estate plan ensuring that the heir will have enough other funds to pay off the mortgage.

If your designated heir is not a close relative, then he or she does not automatically get to take over the mortgage. Normally, lenders will let the person inheriting the home refinance the mortgage if he or she wishes to do so and is able to pay.

If the lender is unwilling to refinance and the home must be sold, then the remainder of the mortgage will usually be due at the time of the sale.

Consult an estate planning attorney to discuss your options.

If you want to learn more about Estate Planing in Overland Park, KS (and throughout the rest of Kansas and Missouri), please visit my Estate Planning website.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 23, 2015) "What Happens When A Person With A Mortgage Passes Away?"

 

 

Can You Use Your Trust Fund To Buy A Home In Overland Park, KS?

Borrowing from a trust can be an alternative to taking a jumbo mortgage, defined as above $417,000 in most markets and $625,500 in some high-price areas such as New York and San Francisco. In some cases, a trust can buy the home outright.

A mortgage tends to be a necessary evil to purchase a home. For most, it's just part of the home buying process.  But what about for those who have trust funds available to help?

Under the right circumstances, trusts may be tapped to assist you and your loved ones, even when it comes to bypassing the bankers and buying a home. This is more and more useful as interest rates rise.

Whether you are the beneficiary of a trust or just out to settle one, you will want to read a recent article in The Wall Street Journal titled “Tapping the Trusty Trust Fund to Buy a House.”

Essentially, a trust can operate in much the same manner as a bank, but without much of the onerous rates, rules, liens and stress. As a trust beneficiary, you can approach the trust for a “mortgage” in the form of a loan from the trust and the trustee can even grant the loan at little or no interest. Sometimes, you can even ask for a full distribution from the trust to finance the whole transaction.

In any event, your access to the trust funds is up to the trustee as guided by the rules of the trust itself. You see, some trusts are not designed to permit this for a variety of reasons, some known only to the person who established the trust. In addition, the trustee may have the interests of other trust beneficiaries to consider. Nevertheless, if there are no such limitations, then having access to trust funds can be a great blessing.

Depending on the language of the trust and your unique circumstance, the trust itself may be engineered specifically to own the house. Properly structured, ownership by the trust can provide important asset protection from potential divorces, lawsuits and bankruptcies. Alternatively, Qualified Personal Residence Trusts (QPRTs) and Intentionally Defective Grantor Trusts (IDGTs) can be extremely valuable in this regard, even though normally we talk about them in the context of transferring the family home.

If you are ready to create a trust for your beneficiaries, or perhaps are looking for creative ways to help your loved ones buy their first home, these are some options to explore.

Reference: The Wall Street Journal (September 19, 2013) “Tapping the Trusty Trust Fund to Buy a House”

For more information about Trusts in Overland Park, KS, please visit my website.

Passing On the Family Home to the Next Generation - Especially in Overland Park, KS

There are nearly half a dozen ways to give a home to your child. And a couple are tax-free.

You’re probably well aware that for many families, the family home is the single most important estate asset. Can you imagine your kids having to part with the home they grew up in? The thought evokes many emotions when making end-of-life plans, and passing along the family home to the next generation is certainly an option. Family homes may also be the most valuable estate assets, and estate taxes may complicate plans for passing them along. If this is your goal, however, don't give up. There are tax-savvy strategies to make it happen, but they require you to plan ahead.

For a good overview of this topic, turn to a recent article in SmartMoney, “Passing Your Home to Heirs.” The article is pretty easy reading on a fairly complex subject, and includes a run-down on some effective strategies: from the simple bequest in your will, to variously structured sales, to more sophisticated trust-based strategies.

Which planning strategy will work best for you depends upon your unique circumstances. This definitely is not a do-it-yourself undertaking. There are many factors to be considered and legal land mines to avoid.

If passing a family home to your heirs is one of your goals, be sure to discuss this with your estate planning attorney, who can guide you to implement a strategy that will work for you. 

Reference: SmartMoney (February 5, 2013) “Passing Your Home to Heirs”

For more information about this and related Inheritance Planning issues, please visit my website.

Weekly Blog Digest - Overland Park, KS - Estate Planning

The Reverse Mortgage Loan – Going Once, Going Twice… 

The federal government is proposing to make big changes to its reverse mortgage program early next year that should make the (reverse mortgage) loans safer for seniors who use them to tap home equity.

 Planning for Retirement Starts at Home

 An AARP survey found that more than 80 percent of us want to stay in our homes as we grow old. And as boomers go, so goes the remodeling industry.

 The Fiscal Cliff & Your Health

 If President Barack Obama and Congress cannot reach an agreement on the fiscal cliff…it would likely send the country back into recession…and ultimately, it could hurt your physical and emotional health.

 Post-traumatic Stress Disorder & Veteran’s Benefits

 [Vietnam veterans are] part of a class-action lawsuit against the armed forces arguing that [Vietnam veterans] had post-traumatic stress disorder when they were issued other-than-honorable discharges.

 Maximize Your Hiring Potential – Resume Enhancement

 Older workers come to the table with experience, maturity and dedication… But older workers who do wind up unemployed often struggle to recover.

The Reverse Mortgage Loan – Going Once, Going Twice…

The federal government is proposing to make big changes to its reverse mortgage program early next year that should make the (reverse mortgage) loans safer for seniors who use them to tap home equity.

In a response to the speculative loan market, we have seen increased regulation in the banking and loan industries. Yet the structure of one type of loan has gone relatively unchanged in that time - the reverse mortgage loan.

A reverse mortgage is a special type of home loan that allows homeowners to convert a portion of their home equity into cash. The equity you built up over years of making mortgage payments can be paid to you to supplement your income.

The issue was recently brought up in a Reuters article titled, “Federal clampdown looming on reverse mortgages.”

According to the Department of Housing and Urban Development, reverse mortgages are a safe plan that can help older Americans supplement Social Security, meet unexpected medical expenses, and make home improvements. Unfortunately, riskier loan structures are making reverse mortgages increasingly dangerous. In response, the federal government is planning to take a more conservative approach when evaluating new reverse mortgage loan applications. This means reverse mortgage loans will be harder to acquire in coming months.

For purposes of estate planning, the reverse mortgage is an idea worth exploring. In practice, when your home is no longer used as a primary residence, the cash, interest, and other finance charges from the reverse mortgage loan must be repaid. However, all proceeds beyond such amounts owed on the reverse mortgage belong to your spouse or estate and no debt is passed along to the estate or heirs. This makes the reverse mortgage option an appealing idea for older homeowners who may need supplemental income, but hope to avoid passing on debt to family members.

If you or your loved ones are concerned about needing additional income during the coming months, reverse mortgages are worth discussing with your family and estate planning attorney before lending standards become too strict.

Reference: Reuters (December 5, 2012) “Federal clampdown looming on reverse mortgages”

For more information on the residual effects of reverse mortgages in Overland Park, KS, please visit my website.