Can You Inherit a Debt? | Debt After Death

Attorney and Financial Advisor Chris Berry answer the question regarding inheriting a property and the related debt that is tied to it.

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.

With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.


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Episode Transcript

Debt after Death

Once my sister dies and I inherit her empty home and my responsible for paying off her debts her home is the only asset.

Welcome to Berry’s Bites, please join our host attorney and financial advisor Chris Berry. We have the ladybird deed and again it’s like a beneficiary designation so right now sister owns it and then upon death it goes to you well you inherit the property. Okay, you don’t inherit any of her debt but there might be a mortgage that’s attached to this property.

So we’ll talk about how this works, let’s say the mortgage is for fifty thousand, and let’s say the home is valued at two hundred thousand when she dies that triggers a due on sale clause where now this mortgage company has to get paid off and you can either refinance it. So now you take the house and now you get your own mortgage you could sell it you sell for 200 you pay off the mortgage company you’re walking away with 150 or pay off the mortgage with other funds because it’s a secured debt.

So this follows not because your sister passed, follows the asset or I guess you could refinance it you could sell it you could pay off the debt or you could just let them take the house so this was big back in the housing crisis, so if said the mortgage was 250 and the house was only valued at 200 you would say okay mortgage company all yours take it but yeah otherwise it passes to you debt-free the rest of her debts typically are probably going to be unsecured like credit card debt, that type of thing that dies basically when she dies theoretically they could open up a probate but there’s not going to be any assets and going through probate so it’s kind of pointless unless you sign something as a co-signer or something like that you never inherit unsecured debt because it’s not secured by anything but if you have an auto loan that’s secured with a car if you have a mortgage that’s secured with a home those typically have to be triggered or handled because of the due on sale clause that’s part of those.


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