New York estate administration involves the collection of assets and the payment of the decedent’s debts and obligations. Assets may include bank accounts, financial holdings in brokerage accounts, pension funds, 401(k) accounts and life insurance. One of the major assets typically found in an estate is real estate. This asset is usually the home where the decedent lived.
Among the many types of debts and obligations, there may be credit card balances, hospital or medical bills, car loans and other outstanding debt obligations. The major source of a debt obligation is most commonly the unpaid mortgage balance on a decedent’s home.
In many cases, mortgage debt cannot be paid without selling the real estate against which it is filed as a lien.
An estate executor or administrator is often faced with the task of satisfying the decedent’s mortgage debt. Most often the mortgage is the typical mortgage or home equity loan which a person establishes either in the purchase of a home or simply to obtain a line of credit. In these instances, the decedent would be paying off the loan incrementally over time.
In recent years there has come into existence a new type of mortgage called a reverse mortgage. Unlike a traditional loan, these mortgages are not taken out and then paid going forward. Instead, a reverse mortgage is a loan that a homeowner who is 62 years of age or older can obtain through financing the home’s equity. The loan does not require the owner to make payments during his life. Instead, the loan is repaid upon death.
While repaying a reverse mortgage at death relieves a homeowner from current lifetime mortgage payments, these loans often require repayment in full at death. Therefore, the mortgage lender may be more aggressive in seeking payment than a traditional mortgage lender. An administrator or executor may be placed under pressure to obtain his appointment from the Surrogate’s Court quickly and to sell the property to avoid a foreclosure. This may also present a problem if other family members live in the home and are not prepared to move to allow the house to be sold.
Estate fiduciaries must be vigilant and understand the various assets and liabilities which must be attended to for a successful estate settlement. If a person is engaging in estate planning it is a good idea to consider the effect that a reverse mortgage may have on an estate. Surviving family members may have known that the mortgage used to purchase a home was paid in full, only to be surprised to learn that there is a substantial reverse mortgage balance which has been accumulating over time and must be immediately paid by the estate. Since these mortgages do not need to be repaid until death and accumulate interest over time, careful consideration should be given to the long-term effect on an inheritance.
I have represented estate executors and administrators in many estates where the estate real estate was subject to a reverse mortgage. Call Me Now for a free confidential review of your estate matter. We offer reasonable and flexible fee arrangements and personal representation.
New York Trusts and Estates Attorney Jules Martin Haas has helped many clients over the past 40 years resolve issues relating to guardianship and probate and estate settlement throughout New York City including the Bronx, Queens, Brooklyn, Manhattan, Nassau and Suffolk County. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial free consultation.