Estate settlement

[mhbrown]

My sister inlaw recently passed away in a car accident. We are in dispute as to who is responsible for paying for a loan of hers.

She and my husband were both named on the deed to her house, she had gotten married, but her husband did not want his name on the deed to the house.

The loan in question was only signed by her, and no one else. The before mentioned property is tied into the loan as lein.

Should the estate cover the cost of the loan which is a home equity loan, or should my husband have to finish paying for it. Her husband has since vacated the house.

We are really searching for answers on this issue.

 

[Michael Wechsler]

Sorry to hear about the passing of your sister-in-law. Who took out the loan?

I'm assuming that what happened is that your sister-in-law and your husband bought a house and they jointly signed a deed. Upon remarriage your brother had his name removed from the deed. Your sister-in-law took then out a home equity loan against the house. She died and left the house to your brother but nothing was mentioned as to where the loan was to be satisfied.

If this is the case.... I can't be sure but I would think by sorting out the events that the Estate owes the money on the loan. If the Estate does not have sufficient money to repay the loan, then the loan may be satisfied against the equity in the home. My understanding of home equity loans is that the equity in the home is used as collateral for a loan that is entered into and owed by the decedant. Thus, the Estate would be the logical place to go after first and collateral foreclosed upon in the event the debtor defaults.

As always, all the facts need to be looked over for a proper answer. This also may involve further legal research but off the cuff it would seem to me to be the logical result.

 

[rbrown100]

Dear Poster: I hope this reply isn't too late to be of help. As usual, it seems to me that michael has given you excellent advice; your sister-in-law's Estate would be primarily responsible for the loan, but since the loan is secured by the house the bank may be able to foreclose on it if the Estate doesn't have enough money or other assets.

Question: how was your late sister-in-law able to be the only signer on the home equity loan when she wasn't the only homeowner listed on the deed? And didn't the bank do a title check before they issued the loan?

Let me guess at a factual scenario that may be an answer, and please correct me if I'm wrong. Your husband and his sister (your late sister-in-law?) acquired together the home in question. They took title to the home, not as joint tenants with right of survivorship, but as tenants in common, say with each owning 50%. Your husband's sister then married her husband, who never had his name on the deed and has now moved out. Under those circumstances your late sister-in-law perhaps may have been able to get a home equity loan secured only by her 50% of the house. And only her signature may have been required.

If something like this is what happened, the bank may still be able to foreclose on the home, but should only be able to collect what's owed from the 50% owned by the Estate of your late sister-in-law, and not from the 50% owned by your husband.

If your husband and sister-in-law owned the home as joint tenants with right of survivorship, not only should she not have been able to get the loan without your husband's signature, but the entire home would become your husband's sole property by operation of law - it wouldn't ever become part of your sister-in-law's probate estate.

As michael said, this is a case where factual details seem crucial, e.g. the exact wording of the deed. If you can, please let us know what happens. Also, I'd love to hear from other members on this one. Thanks.

 

[mhbrown]

To verify some facts. When my husband's sister wanted to buy the house, she didn't have enough credit to get it herself. My husband co-signed the original note, and therfore his name was put on the deed. Other than that my husband had absolutly no interest in the house. The original note has been paid off.

Since this time, his sister got married, and her husband didn't want his name put on the deed, due to problems he had had in the past with a previous marriage, and didn't want to take a chance with their house.

At the time of her death, there was more than enough in her estate to pay the debt off, but what her husband has done since then is beyond us.

As I understand it from talking to the bank where the loan is, the loan is actually a home equity loan, where they consolidated some bills, and did a few home improvements. My husband is not a cosigner on this loan, his sister is the only one signed on the loan.

We are going to try and talk to an attorney close to home, and see if we can get this settled through her estate.

Bottom line, my husband had no interest in the house what so ever until her death, and only then because his name was on the deed.

Thanks for all your help. Hope this clears more things up, and appreciate additional comments.

Melissa

 

[rbrown100]

Melissa-

Thanks for your reply. A couple of quick reactions:

1. Your husband's name on the deed should give him legal title to the house, even if he never gave his sister any money. Either his guaranteeing his sister's loan was the quid pro quo for getting his name on the deed, or his sister in effect made a gift to him of an ownership interest in the house. Either way, after his name was on the deed your husband was (and is) a, or the, legal owner of the house. So I'm having touble understanding how a home equity loan was validly obtained without his signature. (Anyone else - is there something I'm missing here about home equity loans?)

2. Is it possible that the deed was never properly recorded? That might explain how the home equity loan got past the bank and its title insurance company. Not recording the deed, however, may give rise to other legal recourse for your husband: e.g., the deal was that your husband was supposed to get his name on a properly recorded deed and this was never done. But even this may not give him rights superior to a bank making a home equity loan in good faith - it depends on the law of your state.

3. Do you happen to know if you're in a community property state? I could list them for you, but I don't yet see what difference it should make - your late sister-in-law bought the house before her marriage. (But did her husband help pay off the original loan? On the other hand, did her husband benefit from the home equity loan by using part of it to pay some of his bills? I gather that this loan didn't benefit your husband). Maybe another contributor to this forum could shed some light on this.

4. You say the Estate originally had enough money to pay the loan. Whether or not your sister-in-law had a Will (which almost always directs payment of the deceased's just debts as the first
order of business), the executor or administrator has to account for the Estate's funds to a probate or surrogate's court. This usually doesn't happen until the Estate is finally settled, but keep it in mind in terms of finding out where the money went.

I know I've gone on at length, and I am sorry for your personal loss, but I find this matter interesting, and troubling. I wish you and your attorney good luck in resolving this case, and please let me know how it turns out.

 

[brian]

Originally posted by mhbrown:
At the time of her death, there was more than enough in her estate to pay the debt off, but what her husband has done since then is beyond us.

Who was left the house in your sister's will?

 

[Michael Wechsler]

rbrown's response is excellent and detailed and also raises up a number of interesting points regarding title. There are still many open variables in this very complex issue.

What I'd be interested is knowing what you really want to accomplish. Who does own the home now? It would seem your husband has title to half even though he signed his name without paying into the home but I am unsure as to who holds the second half.

If you are worried about being liable for payments on the home, there may not be cause to worry as it would seem that the house can be sold and your husband should receive at least 1/2 of the equity that remained in the house as a result of the sale.