All debts must be paid or provided for before assets can be distributed from a Louisiana estate. However, not all debts are the same. Mortgages are different from other types of debts. For example, it may be possible for the estate to pay off a credit card balance but not the outstanding mortgage balance. Louisiana law recognizes this and provides another way for heirs to inherit property without first paying off the mortgage.
The Mortgage Follows the Property
Louisiana law allows the heir who inherits mortgaged property to provide for the mortgage. That means, if you agree to take ownership of the mortgaged home, building, or land, you also agree to continue paying the mortgage; however, you do not have to pay off the remaining mortgage before becoming the property owner. Instead, the mortgage becomes your legal responsibility. You are responsible for paying the mortgage just as you would have been if you had applied for and taken out the mortgage on the property from the time of initial purchase.
Five Questions You May Need Answered Before You Inherit Real Estate
Paying a mortgage is a big financial responsibility. Even if you want the property, it’s essential to get all of the legal and financial information necessary to make an informed decision before you inherit the debt that goes along with it. For example, you may want answers to the following questions:
What if the mortgage had a cosigner?
A co-borrower or cosigner to the loan may be legally required to pay the loan after the other mortgage borrower passes away. However, if someone other than the co-borrower inherits the property, the new owner may become responsible for paying the mortgage.
What if I don’t want to take on the mortgage?
You don’t have to accept your inheritance if you don’t want the financial burden of the mortgage. However, you should understand all of the financial implications of your decision before you decide to refuse the bequest. There may be ways to refinance the property or modify the loan that allow you to assume the mortgage comfortably.
What if there are multiple heirs?
Complications may arise when multiple heirs inherit a mortgaged property. There may be disputes about who uses the property and who pays the mortgage. Generally, there are three options if you find yourself in this situation. You and the other heirs may choose to: (1) sell the property, pay off the mortgage, and divide the remaining profit between you; (2) agree on how the property will be used and the mortgage will be paid; or (3) hire an attorney to resolve these issues.
What happens if no one pays the mortgage?
The bank or mortgage servicer has a legal right to be paid. If no payments are made on the mortgage, the loan holder may begin foreclosure proceedings and sell the property. Any money from the foreclosure that is in excess of the loan amount will go to the estate for distribution.
How can I make this process easier?
You and your family are likely grieving the loss of a loved one if you’ve inherited a mortgaged property. It can be hard to mourn your loss and consider all of the financial and practical implications of this type of bequest. Accordingly, you may wish to discuss all of your legal options with an experienced Louisiana succession attorney.
Talk to a Louisiana Succession Lawyer Before the Succession Is Settled
Don’t wait until mortgage payments are missed, foreclosure proceedings have begun, or the succession is settled to contact an attorney. Instead, whether or not you intend to accept the inheritance, we encourage you to contact our New Orleans probate attorneys today to learn more about your legal options. Each year, we help hundreds of Louisiana families navigate the succession process, and we are ready to help you deal with any mortgaged properties and other bequests.