How can I prevent my children from having to take on my mortgage? 6 Answers as of January 31, 2011

How do I protect my home in case I die? There is still a mortgage. My kids still live in it ages 22 and 19. How can they keep the house and continue to pay for it so the state does not put it in probate. They both work and would need the house to live in if anything would happen to me.

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Law Office of Larry Webb
Law Office of Larry Webb | Larry Webb
Life insurance and a revocable trust to avoid probate. Probate is a process to distribute your property if you do not have a trust.
Answer Applies to: California
Replied: 1/31/2011
Hugo Florido ESQ.
Hugo Florido ESQ. | Hugo Florido
There are several types of insurances offered to protect against this.
Answer Applies to: Florida
Replied: 1/26/2011
Harris Law Firm, pc
Harris Law Firm, pc | Robert Harris
You can get mortgage insurance. Or, maybe what would be better is if you bought a term life insurance policy (Make sure it's a term insurance policy, don't let them sell you a whole life policy). Make the face amount equal to the current mortgage and make it for as long as you owe on the mortgage.

So, for instance, if you owe 200,000. And you will be paying for another 20 years. You can make it a 200,000 policy for a 20 year term.

Now, this is a little trickier than it sounds. You can either make the kids joint beneficiaries so they can use it as they see fit, and if that means to pay the mortgage, that's fine. BUT, if one kid says he just wants the 100,000, the other kid won't have enough to pay the mortgage. BUT, that may be fine. They can then sell the house, and still have 100,000 each to make sure they're taken care of, have money for school, whatever. And if they chose to pay the mortgage, that's fine.

The other thing you can do is to do a will (which you should have anyway), and set up a trust that is only used to take the insurance money and pay the mortgage, and if there is anything left after the mortgage is paid, the kids split it.

For instance, say you've got that 200,000 insurance policy and when you pass away, you only owe 150,000. The 200,000 goes to the trust, the trustee pays the mortgage, and the rest of the 50,000 is paid to the kids. They also have the home free and clear.

It sounds to me like you need a simple estate plan, including a will with a minor trust. We do these simple plans for single persons for a flat fee of $500.
Answer Applies to: Oregon
Replied: 1/25/2011
Law Offices of Brian Chew
Law Offices of Brian Chew | Brian Chew
Question 1: If your children decide to take your home as an inheritance, they will be responsible for the mortgage unless you estate pays it off. If they do not take the property, your estate will be responsible for the mortgage. If there is insufficient funds in the estate to continue paying the mortgage, the bank will then foreclose on your home. Your children are never required to assume your mortgage.

Question 2: In order to avoid probate with your home, you should contact a qualified estate planning attorney to have a living trust created for your home. The only way to ensure that there will be sufficient assets to pay the mortgage if something should happen to you would be to purchase a life insurance policy.
Answer Applies to: California
Replied: 1/25/2011
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