I’m looking for advice from people who have dealt with inheriting a house that was placed in a living trust/estate situation where the finances were not well managed.
I’m an only child, and my parents were never very good with money. My mother is 75 and currently in decent health, but I’m starting to realize I could eventually inherit a major financial problem instead of an asset, especially if there are debts, deferred maintenance, taxes, or a mortgage involved.
I’m trying to be proactive and protect myself financially before I’m suddenly responsible for decisions I don’t fully understand.
A few questions I have:
\- If there is still a mortgage on the home, what options do people usually look into?
\- Is life insurance even realistic or worthwhile at age 75?
\- Have any of you used trusts, estate attorneys, long-term care planning, or other strategies to avoid being financially crushed later?
\- What mistakes should I avoid right now while my parent is still alive and mentally capable?
I’m not looking to take advantage of anyone or “protect an inheritance.” I’m honestly trying to avoid ending up trapped by a house that could become a financial ticking time bomb.
Any advice, personal experiences, or things you wish you had known earlier would really help.
How do you protect yourself from inheriting a financially troubled house from aging parents?
byu/Fronz482 inpersonalfinance
Posted by Fronz482
9 Comments
I think talking with your mom would be a good first step, figure out what she owes on the house if anything, what maintenance needs to be done, if you are even the one inheriting it etc.
But even if you don’t do that, you can still just sell the house and take any remainder as your inheritance, lots of people inherit assets they don’t want, they just sell them and then use the cash
Inherit the house, sell it “as is” and pay off the remaining mortgage. If the mortgage is greater than the projected sale price, disclaim that portion of the estate. The estate will then need to dispose of the asset and settle the outstanding indebtedness.
Life insurance is to provide for the loss of income after the death of the insured. If you are not depending on your Mothers income for support, then there is likely no insurable need. Life insurance for a 75 year old person is likely unaffordable in any event.
You will not be crushed by your Mothers debts unless you are a co-signer on any loans. The estate may be exhausted clearing up the mess, but you don’t inherit her issues unless you voluntarily sign on to do so. Don’t do that!
If they are insolvent then you can renounce the inheritance or declare the estate bankrupt.
A probate attorney would be the one to handle this.
You just need to be aware you won’t have right to anything of value. They will sell off assets to pay creditors in a specific order.
First talk with your mom while you can. Ask about seeing her fiancnes, find out which company has the mortage. And talk with her about what she would like to do for both long term care and after life. I also highly suggest you get a consult with an elder law attorney (not an estate planner), you and your mom. Bring all the paper work with you(or make copies, theyll want copies) yall can ask about final expense insurance (life insurance for you mom would be very expensive, at this point that money could be used for terminal end life care to funeral expenses. theyll be able to offer you some insight on how a living trust on a home. Also talk with your mom and the lawyer about POA or MPOA (depending on your states laws) in the state my mom lives in, if I dont MPOA, they can pretty much do whatever they want to do. Medicaid, does your state have extended Medicare and what does it provide
You’d need to provide a lot more information, which is not a good thing to do here.
Find out what you can and see if you can talk to who helped set up the trust. They would have more answers.
But more than likely, as long as you’re not trying to keep the house or any other assets worth coming after by potential debtors, you should be fine.
Be wary of accidentally agreeing to take on any responsibility for any debts that are not currently connected to your name.
You don’t inherit debt from parents unless you co-signed loans. If their finances are under water when they pass, you can just walk away.
I would get information from her about the house — if there is a mortgage (or a second mortgage/HELOC loan that’s been accessed), and if there are taxes that are delinquent or any other liens on the property.
If your mother does not know, a title search can find the answers — an attorney can assist with this.
If the title is clear, and there is no mortgage (or a low outstanding balance that is current), and the only real worry is deferred maintenance, there isn’t much to worry about. There are investors that will buy houses for the land or to flip. So you’d get some money.
Estate will settle debts before any payout to heirs. If debts can’t be settled the inheritees have no obligation to make up the difference. That said, they can’t take the assets and leave the debt.
Op can always disclaim the house if it’s a net loser. No need to make a decision until you know the actual situation.
You do what I did. Sell it as soon as you can, until it’s sold pay the taxes and utilities out of your pocket. And stop by or pay someone to stop by and take the trash to the curb and get the mail so the house doesn’t look abandoned. Houses sell much faster these days.