Process of Willing a Mortgaged Home to a Person Not on Deed or Note

[Mulligan]

The thread of canceling term life insurance got me thinking, because I will actually be buying some soon for this following situation: My longtime GF will be moving in with me in the coming year or so. If I should unexpectedly kick the bucket after she moves in, I would want her to have my home. It has a mortgage and she could not afford to live in it, if she had to take over payments, so I will purchase some term life insurance, as I would want my other assets passed on to my DD. Besides writing it in the will, how would the process play out for her if I died? I don't have her and do not plan on having her as a co-owner of the home, and of course she is not on the loan note.
How does this all resolve itself if I died? The intent is for the term life insurance to pay off the note, but how does this insure the property becomes hers? Is the will enough to satisfy that? I assume then she would have to write out checks in the short term to cover mortgage payment until insurance settles with her. Anything that needs to be done correctly on my part?

 

[rodi]

It sounds like you've got a solid plan.

If the will specifies the house and debt go to her. And your life insurance names her as the beneficiary. It's up to her to use the life insurance to pay off the mortgage.

Or not.

Make sure your daughter is aware of your plans. It's always better to manage expectations, rather than present a surprise from the grave.

When my dad moved in with his partner, she owned the house outright. But she has limited income/assets so he took over all of the deferred maintenance - putting on a new, roof, paying for upgrading and remodeling. And they updated their trusts. Both wanted to leave their assets to their children, but not leave their partner homeless. His trust gave her a lump sum that was enough to cover several years expenses. Her trust set out that my dad would not be kicked out of the house for at least 5 years. (Non issue, since he predeceased her.)

When they did this - both of them told us adult children what the plan was. This way there was no surprise and no squabbling. I suspect my brother would have had issues if he hadn't been forewarned... but he had issues over lots of stuff.

 

[Mulligan]

It sounds like you've got a solid plan.

If the will specifies the house and debt go to her. And your life insurance names her as the beneficiary. It's up to her to use the life insurance to pay off the mortgage.

Or not.

Make sure your daughter is aware of your plans. It's always better to manage expectations, rather than present a surprise from the grave.

When my dad moved in with his partner, she owned the house outright. But she has limited income/assets so he took over all of the deferred maintenance - putting on a new, roof, paying for upgrading and remodeling. And they updated their trusts. Both wanted to leave their assets to their children, but not leave their partner homeless. His trust gave her a lump sum that was enough to cover several years expenses. Her trust set out that my dad would not be kicked out of the house for at least 5 years. (Non issue, since he predeceased her.)

When they did this - both of them told us adult children what the plan was. This way there was no surprise and no squabbling. I suspect my brother would have had issues if he hadn't been forewarned... but he had issues over lots of stuff.

So you also have to specify that the debt goes to her, and you can do that? I guess it would be possible for GF to just take the insurance money and run, but she would be leaving the other half of the value of the house on the table as the insurance would only cover the loan, not value of home. Yes, I need to share with DD, but she just turned 18 and still clueless. I must confess, I don't have a will, but all of my assets have DD as beneficiary. The house is in limbo, I guess which means I need to get a will as it has quite a bit of equity in it.
I just wanted a 10 year window or so on the term life. I am in a non typical situation. I am under 50 retired, but assets are under 200k but growing faster now in retirement (half of that has been saved in the past 4 years, but I will never be wealthy), as my pension allows me to save a lot. It would be in DD and GF best interests that I live, as the longer I live, the more money they will get, as I never plan to use any of it and just build it.

 

[Dimsumkid]

If the executor of the will isn't your girlfriend, make sure you specify she gets to stay in the house and how the mortgage will get paid until it's transferred to her. Let's say the executor doesn't like/get along with your GF, this person has complete control over the house and other assets until probate is completed. The mortgage is also the responsibility of the executor until probate is complete. This could take years and if there's no assets to pay outstanding bills or the house was under water, the executor could stop paying the mortgage and sell the house. Any mortgage payments made by your GF is a "loan" to your estate until probate is complete, She would need to be repaid by your estate through probate final accounting.

Other ways to transfer real estate, some states allow TOD on the title (I saw 12 states have this). Another option is a land trust using a bank, but you have to pay annual fees for this.

 

[Mulligan]

If the executor of the will isn't your girlfriend, make sure you specify she gets to stay in the house and how the mortgage will get paid until it's transferred to her. Let's say the executor doesn't like/get along with your GF, this person has complete control over the house and other assets until probate is completed. The mortgage is also the responsibility of the executor until probate is complete. This could take years and if there's no assets to pay outstanding bills or the house was under water, the executor could stop paying the mortgage and sell the house. Any mortgage payments made by your GF is a "loan" to your estate until probate is complete, She would need to be repaid by your estate through probate final accounting.

Other ways to transfer real estate, some states allow TOD on the title (I saw 12 states have this). Another option is a land trust using a bank, but you have to pay annual fees for this.

Well you are awaking me to the term "getting ones affairs in order". Forgot about the executor and probate issues. I have never been involved in any will issues, so I have always just thought in terms of giving the money in my bank accounts to my daughter. Never put any thought into the house issue until now. So I guess all of these issues get resolved with the will, then?

 

[pb4uski]

Just wondering out loud whether you could put your home in a living trust where your are the beneficiary of the trust for your life and your GF becomes the beneficiary upon your death. And then buy an insurance policy naming the trust as the beneficiary and having the trust documents direct that upon your death that the trust is to use the proceeds from the insurance to pay off any remaining mortgage balance with any excess funds being distributed to DD and then transfer the house free and clear to GF.

If TOD title is available that may be easier and then buy the insurance and make GF as beneficiary. While GF could then get the house and possible not use the death benefit to pay off the mortgage, at that point it would be GF's problem.

Not sure if you could make the mortgage lender the benefiiciary and instruct that the death benefit be used to payoff the loan and then designate who any excess would be paid to.

 

[Dimsumkid]

Well you are awaking me to the term "getting ones affairs in order". Forgot about the executor and probate issues. I have never been involved in any will issues, so I have always just thought in terms of giving the money in my bank accounts to my daughter. Never put any thought into the house issue until now. So I guess all of these issues get resolved with the will, then?

As long as the executor has clear instructions and you trust this person and will follow your intentions, what you described sounds reasonable. Whenever money is involved, it's amazing how some people (I mean family) change completely. Just remember that any will can be challenged, even for ridiculous reasons.