6 days ago
My mom died at 78, leaving me a fully owned home, but with a bunch of debt too — should I keep the house?
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Losing a parent is devastating, and taking on the inevitable tasks that follow can be overwhelming.
It can be even more disorienting if your last surviving parent has, for example, passed away with a home equity line of credit (HELOC) without any life insurance to help cover the debt. And that's without considering any outstanding credit card debt.
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The reality is, those debts will likely need to be paid. The question then becomes: How should you, as their child, deal with inherited debt?
As a general rule, if you inherit debt, you are not responsible for paying it out of your own pocket. But creditors can come after the estate and try to collect debt from assets the deceased left behind. This is especially true when it comes to a HELOC, because it is a secured loan where the house in question is the collateral.
If no life insurance policies or savings are passed down, then a home may be the only item of significant value in the estate. So, when creditors make claims against the estate, they will likely be fulfilled by using equity from the home.
If the property is left in your name, then you could access this equity by selling the home, using some of the proceeds to pay back the debt and hopefully keep any remaining proceeds. Another option would be to get a new mortgage to pay off the existing loan, but that could be a lifelong re-commitment to an aging home.
If you do decide to sell, but want to keep a toe in the $34.9 trillion U.S. home equity market, you could invest some of the proceeds back into real estate.
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Deciding whether to keep the home or not is a personal choice, but it's worth considering both the financial and emotional implications.
First and foremost, think about whether you can afford the home if you keep it. In this case, you would need to pay the new mortgage to cover the HELOC debts. You'll also have to pay for property taxes, insurance and upkeep. You want to be 100% sure that you can afford these costs so you don't risk keeping the house and getting foreclosed anyway. This is where a financial advisor can step in and help.
matches you with a vetted financial advisor for free that can offer personalized advice based on your needs. Your match is also guaranteed to be a fiduciary, meaning that they're legally obligated to act in your best financial interests.
Once you match with an advisor you can schedule a free call with no-obligation to hire to see if they're a good fit for you.
A good advisor can chart a course for your financial future — from whether keeping the home is something you can realistically afford, to how you might invest the proceeds if you decide to sell.
You also have to think about whether you want the emotional burden of owning the home. If you've spent a lot of time there, during your childhood or otherwise, it will surely carry plenty of memories. Moving on can be challenging, but sometimes liberating, depending on where you stand.
Inheriting debt is never easy, and it can make a tough time tougher still for those grieving the loss of a loved one.
Inheriting life insurance proceeds, on the other hand, can help loved ones rest easier. They can also help cover unexpected costs, like paying for a funeral or managing estate-based debt. Having your affairs in order, including life insurance, can make a difficult time easier to manage for your family.
Ethos Life Insurance is a modern life insurance company that offers a seamless, completely online process. In 5-minutes, you can see if you're eligible for term life insurance, with no medical exams or blood tests required. Ethos simplifies the traditionally complex and time-consuming process of buying life insurance, making it quick, transparent and accessible.
The best part? Ethos provides up to $2 million in coverage at a rate of just $2 per day.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
