Say a family member dies, you’re in their will, and you inherit a lot of money. But, the amount isn’t that large, and for whatever reason, it would either hurt or at least complicate your financial situation. Could you reject the money, or would you have to take it and all the responsibilities that come with it?
What about inheriting something that’s still having payments on it? If you were willed a house, that the owner was still making payments on when they died…well first, could they will it to you if it wasn’t paid off? And second, if they could, could you reject it, or would the responsibility of making the payments now fall on you?
IANAEL (estate lawyer) but the way I understand it is that if you die with outstanding debt, the property must be sold to pay it and the heir gets any remaining money. I’m sure if you wanted to keep the house for sentimental reasons, you could pay the bank the balance-- banks would rather have money in the hand than wait for an auction and the uncertainty of how much it will bring.
First, since this is a hypothetical situation, this isn’t legal advice. I’m not your lawyer, you’re not my client.
There’s a thing called a “quitclaim.” If you are given something in a will, and you don’t want it, for whatever reason, you can sign a quitclaim giving up your right to it. Laws may vary, but generally what happens is that the quitclaim means that you are treated as having pre-deceased the decedent – you died before the guy that wrote the will died. So whatever would have gone to you passes as it would have passed if you were dead. And that depends on how the will is written.
(In my life, my mother has lots of siblings, some better off than others. The more well-off siblings have already agreed to quitclaim when my grandparents pass, so that their estate will be given only to the kids who need it the most. But the way the will is written, not only does my mom have to quitclaim, but all her children do as well, or else we’d split mom’s share.)
Second, the house problem. Again, that depends on what the will says. If you are given the house subject to the current indebtedness, then you would have to take the debt with the house. Or the will could be written to give you a “life estate” in the house – you could live there rent free for the rest of your life, and the estate pays the upkeep. Or, as Lissa said, the estate could pay off the house, so you would take it debt free.
Bottom line: it all depends on how the will is written, but if you don’t want what you’re given, quitclaim.
Interesting. Thanks for all the info. After I posted this, I felt kind of stupid because I figured, of course there has to be some way of rejecting an inheritance. The reason I asked though is that I never heard of anybody doing it before.
Anyway, thanks again.
Actually, what you are talking about is usually called a disclaimer. A quitclaim is a kind of a deed. But maybe your jurisdiction is different. Anyway, same difference.
Actually, as others have said, it depends. If you are a relative of the dead person, the transfer of the property does not trigger the due on sale clause, which means that you could continue to pay the existing mortgage. If you didn’t pay, the bank would foreclose and take the property back. If you are not a relative of the dead person, then you’d have to refinance, unless the mortgage was assumable (VA mortgages are for example).
The will might require the mortgage to be paid off with assets of the estate. A good estate plan would handle the mortgage issue in some way (a life insurance policy is a common method). Also, under some circumstances, the probate law in your state might require the mortgage to be paid by assets of the estate, depending on the language in the will. http://www.fredfranke.com/lecture16.htm (this is called exoneration).