Outstanding debt and real estate

[TJNDND]

Hi,

Quick question regarding estate planning. My wife currently owns a condo (75K owed) that we use as a rental, about 40K in credit card/student loan debt, and also now our current home, with an outstanding mortgage of 150k. The mortgages on the condo and home are with two separate banks. Everything above is currently solely in her name, nothing in mine (except for my own student loan/CC debt).

We have enough insurance to cover our current home, but not enough to cover the condo, or her student loan/CC debt. My question is, if she were to heaven forbid pass away - if I paid off our current mortgage with the insurance proceeds and was put on the title to the property, what happens with the condo/credit card debt she had outstanding I just let them go. Could take force me to sell, or take the current home or is it untouchable? I could also keep the condo as a rental, but without the mortgage paid off - would the property/responsibility for the loan just pass to me without qualifying for a new loan on my own?

I'm in Illinois which is a recourse state.

Thanks!
Thanks!

 

[curb1]

Your question has a strange odor associated with it.

 

[TJNDND]

?

What is that supposed to mean?

 

[ecmst12]

The obvious solution would be to get on the title to the condo now, as joint tenants with right of survivorship, but that would present a problem if you guys were to split up before she dies - she might not want to make you a joint owner of this property.

 

[curb1]

Another solution would be to buy term life insurance to cover the costs.

 

[LdiJ]

Hi,

Quick question regarding estate planning. My wife currently owns a condo (75K owed) that we use as a rental, about 40K in credit card/student loan debt, and also now our current home, with an outstanding mortgage of 150k. The mortgages on the condo and home are with two separate banks. Everything above is currently solely in her name, nothing in mine (except for my own student loan/CC debt).

We have enough insurance to cover our current home, but not enough to cover the condo, or her student loan/CC debt. My question is, if she were to heaven forbid pass away - if I paid off our current mortgage with the insurance proceeds and was put on the title to the property, what happens with the condo/credit card debt she had outstanding I just let them go. Could take force me to sell, or take the current home or is it untouchable? I could also keep the condo as a rental, but without the mortgage paid off - would the property/responsibility for the loan just pass to me without qualifying for a new loan on my own?

I'm in Illinois which is a recourse state.

Thanks!
Thanks!

The correct answer is that all of the assets you mentioned above, since they are solely in your wife's name, would go into her estate. Since she has student loan debt the assets would have to be sold, and the equity used to pay her student loan debt and any other debts she might have. If she has no will saying otherwise, then any money remaining after the debt was paid off, would go to you.

The insurance would go directly to whomever is named as the beneficiary, and therefore would not be part of the estate. If you choose to use that insurance to pay off her student loan and credit card debt so that you do not have to sell the house or condo, that would be your decision to make.

 

[TJNDND]

?

The correct answer is that all of the assets you mentioned above, since they are solely in your wife's name, would go into her estate. Since she has student loan debt the assets would have to be sold, and the equity used to pay her student loan debt and any other debts she might have. If she has no will saying otherwise, then any money remaining after the debt was paid off, would go to you.

The insurance would go directly to whomever is named as the beneficiary, and therefore would not be part of the estate. If you choose to use that insurance to pay off her student loan and credit card debt so that you do not have to sell the house or condo, that would be your decision to make.

So lets say she puts my name on the title of our current home, and I pay it off with the insurance proceeds. If she has 30k of credit card debt, they would "force" me to sell a 250k home just to pay that debt? The issue is that we have enough life insurance to cover our current home should one of us die, but not enough to cover the condo and credit cards/student loan debt. The student loan debt is only like 7k, but the credit cards+the condo is around 120k.

Couldn't I just continue making payments on the condo as long as I am put on the title, instead of paying it off? Or would I have to "requalify" for a loan?

 

[anteater]

If you inherit the property from your wife, the lender cannot call the loan.

12 USC § 1701j–3 - Preemption of due-on-sale prohibitions

....
(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon—

(1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for household appliances;
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;

 

[curb1]

Just get more term life insurance. It is cheap $200/year. What kind of life insurance do you have now?