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The probate and inheritance process for a HELOC owner can be complex and time-consuming. The process typically begins with the filing of a petition with the court to open probate, which can be done by the HELOC owner's estate administrator or a beneficiary.
The court will then appoint an executor to manage the estate, including the HELOC account. This executor will be responsible for notifying the lender of the HELOC owner's passing and providing documentation to prove their authority to manage the account.
The lender will then freeze the HELOC account, preventing any further draws or payments. This is done to protect the lender's interests and ensure that the account is managed in accordance with the terms of the loan agreement.
The executor will then need to contact the lender to discuss the options for paying off the HELOC balance, which may include selling assets or taking out a new loan.
What Happens After Death?
After a home equity loan owner dies, the lender needs to be notified right away. This is because the lender may require the loan to be paid off immediately.
You'll need to ask about payment deferment options or the possibility of assuming the loan payments, especially if probate is pending or if your inheritance of the property could be contested. Consulting with an attorney or estate specialist can help you decide what's best for your specific situation.
If probate takes a long time and you're unable to make payments, the executor of the estate will need to make arrangements with the lender to pause or defer payments. If no arrangements and no payments are made, the home equity loan will default.
In Canada, if the home equity line of credit is solely in the deceased's name, the bank may force the surviving owners to pay it off in a lump sum. However, if you can make the payments, you can continue with the line of credit as it is.
Probate Process
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The probate process can be lengthy and complex, often taking several months to a year or more to complete.
Depending on the state, you may need to go through probate to settle the estate and determine who gets what property.
Probate involves determining who gets what assets, including any remaining balance on a home equity loan.
You may need to pay off existing debts, such as a home equity loan, from the estate's assets.
If the estate has a home equity loan, you'll need to settle the loan as part of the probate process.
Probate laws vary by state, so it's essential to understand the specific laws in your area.
What Happens
If probate takes a long time, the executor of the estate may need to make arrangements with the lender to pause or defer payments on the home equity loan, or else the loan will default.
The bank will not automatically force you to pay off the line of credit in a lump sum, but you'll need to make payments on it to avoid default.
You can continue making payments on the home equity line of credit as usual, assuming you and your dad are able to do so.
Frequently Asked Questions
Can you inherit a home equity loan?
Yes, you can inherit a home with a mortgage, including a home equity loan, as the lender's rights are protected and vested in the property. Inheriting a home with a mortgage can be complex, so it's best to consult with a financial advisor or attorney for guidance.
Sources
- https://www.sapling.com/8445956/pays-home-equity-loan-die
- https://www.investopedia.com/inheriting-house-home-equity-loan-5295983
- https://cswan.com/what-happens-to-your-home-equity-line-and-mortgage-on-your-death/
- https://money.stackexchange.com/questions/51695/what-happens-to-a-heloc-after-a-death
- https://www.terrysavage.com/ask-terry/heloc-and-death-of-husband/
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