Deceased Spouse's Obligations

Hello Fellow Bloggers and Readers,

The below correspondance is a tough one for me as it asks for help in several areas I am not qualified to answer. Perhaps some of our readers know something or can add to this via comment, article, straight response through our site, etc. If you are qualified, please send me your qualifications and I will add you to the list of approved authors. Thanks in advance for your service!

Dear MortgageMaster,

"My husband passed away 2 months ago. I received a letter from the credit union (located in New Jersey) where we have a mortgage loan (173,395.00) on our primary residence, which is located in New York. We own another home in New Jersey. There is also a Home Equity Line of Credit (19,661.00) on the New York residence, which I'm sure I never signed for, and a credit card of my husbands (20,971.00). The letter states that "This letter will serve as our formal claim against Mr. ..... ............'s estate for the above mentioned loans. It is incumbent on the Executor/Executrix to attempt to satisfy any and all debts of said estate and therefore we anticipate our claim representing an approximate total of $212,028.84."They also sent me a NON-RESIDENT-DECEDENT AFFIDAVIT OF DOMICILE form to fill out and return.Can the mortgage loan on our home really be due in full because my husband has passed away?"

To Which MortgageMaster responded, in Yellow:

I am very sorry to hear of your recent loss. I am sure your emotions are stirred-up enough without the added aggravation of dealing with the estate. Alas, settling the estate is necessary, however. I need a little clarification:

1) I am assuming all three debts that you mentioned are with the same credit union?

2) You mention a NJ home; Are any leins that you mention attached to this home? What is the purpose of mentioning NJ?

3) Is your name on: NY Primary Mortgage? NY Home Equity Line? Credit Card?

4) Is you and your husband's estate in a living trust?

I would suggest that you call the credit union and get a copies of your loan documents for the mortgages and the credit cards. It may take them several weeks. Please let me know as soon as possible and I will do my best to offer some ideas.

Please remember, I am not an attorney or CPA and I do not offer legal or tax advice. I will tell you what I believe to be correct, but I suggest that you confirm my information with your Estate Attorney for your state (as laws may differ state to state).

Our distressed friend replied:

Dear MortgageMaster,

"Thank you for answering so quickly. I appreciate it. To clarify:

1. all three debts are with the same credit union

2. There are no leins on the home in Jersey and I mentioned it because that form they sent me (NON-RESIDENT-DECEDENT AFFIDAVIT OF DOMICILE), asks where he formerly lived in Jersey (he never did), and if he owns realty or tangible property in New Jersey.

3. my name is on the primary mortgage (and all papers were signed by me) my name may be on the home equity line of credit, but I'm quite sure I never signed for that loan I was an authorized user on the account, but the account was only in my husband's name

4. I don't even know what a living trust is. My husband and I had no will. We owned the 2 houses, had very little in the bank, and a lot of bills. He had some insurance and I'm in the process of trying to decide what to pay off ......in fact, that 174,000.00 mortgage is something I could pay If I had to, but I never thought I would be forced to. I thought I would be able to decide what should be paid off. I will call and ask for copies of the documents. I don't have an Estate Attorney. Would you know of any sites where I could try to check out laws for New York State. Again, thank you.

Dear _____,

I say this with as strong a tone as possible, "You need to find a good Estate and/or Real Estate Attorney before you do anything!". A good attorney will possibly save you thousands of dollars in real costs and will definately save you a heap of aggravation! The cost of the attorney is nominal in comparison to how this all could change your life: savings, cashflow, etc. The attorney knows the laws of your state, can negotiate the perils of talking to the credit union, speed up the life insurance claim, etc. In the meantime, you can grieve and start the rebuilding process. I am not qualified to give you advice other than what my thoughts and observations are.

Other than the advice just given, here is what I can offer:

Given that your husband was a member of a credit union, I am hoping that perhaps it was a public servant's union of some sort. For example, the Police, Fire, etc. If so, his Union may offer legal help, an ombudsman, or counseling. If not, I suggest contacting a good attorney.

To me it sounds as though the credit union wants to make sure that they have all their bases covered, including discovering all your "outside assets" like the NJ home.

If your husband signed any or all of the loans under his name only and if your state requires that his estate pay his obligations after death, it would seem that his estate would be obligated to pay the loans. This is also assuming that your name is not on any of the real estate. In this case, an attorney is really needed.

If, however, all the papers for the first mortgage were signed by you as a borrower (not for your husband as Power of Attorney) or signed by the both of you as co-borrowers, I do not know that your husband's passing would trigger the "acceleration clause", or "due upon death" clause. I am in a different state, but I have NEVER, EVER heard of a mortgage, guarenteed by both the husband and wife, and a subject piece of property, coming due because one of he spouses passed-away. Otherwise, every time a spouse passed, the surviving spouse would be forced to sell or refi. With the sheer number of married homeowners who pass every year, I am positive that I would have seen a gazillion loans that needed to be paid off or refi'd over the past 20 years. I have never had a loan that needed to be refi'd because of the passing of a spuse except for affordability reasons. It would be inconsistant with compassion and with all lenders notions that both spouses are equally and individually responsible for the repayment of the mortgage. In other words, if you are both on the loan, one of you passes away, the surviving spouse still has an obligation to make the payments on the loan....not pay the loan off immediately. As long as you are honoring the note, I do not see how or why the lender would want to make a "Demand" that you pay off the mortgages.

Regarding the second mortgage, it is unlikely that your husband got the loan without your signing the loan paperwork or an acknowlegement that he was borrowing against your home (everything I have written is assuming that you are on the Title of the property). Thus, we revert back to a joint obligation on a jointly held piece of property. I find it hard to believe that the credit union can make a "Demand" that you pay off the mortgages. I do not know about unsecured loans.

I know I have not been particularly helpful, but I am hesitant to delve into law. I would ask around and find a good attorney and CPA. I think you have more options than the credit union would lead you to believe.