DISCLAIMERS: This is purely hypothetical (no really, it is!), you are not my lawyer, I am not your client, blah blah blah.
Let’s say my widowed mom dies and leaves me (her only child) her house. I don’t want it - it’s a crumbling wreck in an undesirable neighborhood, and I don’t want to pay back taxes on it. I sign a quitclaim. The house is auctioned off and the money goes to pay her estate’s debts.
Except there wasn’t enough money. Back taxes, delinquent credit card accounts, her AT&T bill, etc. remain.
Are her creditors out of luck? Can they come after me?
Short answer: they’re out of luck legally, but they can (and probably will) try to pester the heirs about paying off her debt.
Longer answer: if there’s something else besides the house to inherit, they also have a claim to that before any heirs can get it. Also, if it wasn’t a parent but a spouse in a community property state, the debts can also potentially transfer. The other exception would be if the child co-signed on the parent’s accounts, taking on the debt upon the parent’s death.
None of the legal details will stop debt collectors, though. Some of them do contact next of kin or friends to try to guilt them into paying off debts, even if there’s no legal or even moral obligation to do so. Some will go over the line and make bogus claims of legal action and sometimes have to be themselves reported.
If you are in the US they are out of luck. Debts are not inherited.
I can’t speak for elsewhere.
I did hear some years ago that because of very high housing costs in Japan, they were starting to issue VERY long term mortgages that were designed to be carried from one generation to the next. But I never heard how that was handled in relation to inheritance law.
IANAL, but isn’t the premise inaccurate as well? The house, even if left to you in the will, is part of the estate and the creditors would have first claim against it, if there are no other assets to pay off the debts. So even if it’s a beautiful home in a wonderful neighborhood and you desparately wanted it, you wouldn’t get it if the debts were larger than the assets.
Exactly. The assets of the estate are used to pay the debts of the estate. Only what’s left over after that is passed to the heirs.
Which is one of the reasons various trust & other legal strategies are becoming more common. The idea is to pass your assets *around *the estate and the debts *through *the estate.
That way the heirs get *all *the assets and the creditors get nothing against the debts.
This, pretty much. I am a lawyer (although not an estate lawyer). The key is to really have NOTHING go through probate. The only kinds of things you want in your will are special bequests… like Dad’s Vietnam medals, or Mom’s treasured whatever collection.
What is the statute of limitations (in Illinois, if you need specifics) on a quitclaim? Further, can a court refuse a quitclaim and compel someone to take posession of something?
What brought this question is a situation here in Springfield. On March 12, 2006, a particular house had a tree fly into it thanks to a tornado, doing considerable damage but by no means leveling it. The house had been empty for some time, and of course has been empty since. It has attacted vermin, vandals, drug dealers, homeless - basically everything that an abandonded property in an urban area can be expected to attract.
The city of Springfield has told the owners to clean it up & pay back taxes or face legal action. The owners have told the city to fuck off; they’re out of state, they inherited the house when their father died, they don’t have the money to fix it, it’s Springfield’s problem, etc.
I don’t know why they don’t just quitclaim the damned thing (or why they didn’t in the first place).
That was our experience when my dad died - the estate absorbed his house (not worth much) and all his debts (quite a bit). His creditors ended up with cents on the dollar repaid, and his ex-wife and kids weren’t on the hook for any debts. Great Antibob is also right that people will try to collect from people that they have no legal right to collect from, so your first stop after a death in the family is probably an appropriate lawyer.
That sounds different then - the out of state owners had already inherited the house when the previous owner died and before the damage was done, so new debts against the property belong to them, not their Dad.
I think there is some misunderstanding about the term “quit claim.”
A quit claim deed is a document transferring your rights in real property to another person/entity while making no representation that you actually had any rights in the property. To put it more simply it’s a way of saying “I’m not saying that I own this property or that the title is free and clear, but if I do, you can have whatever I would be entitled to.” It’s a fast and cheap way of transferring your property to someone willing to take the risk of having a clouded title.
If someone leaves you something in their will that you don’t want, it’s a bad idea to accept it and then “quit claim it.” “Quit claim” is just a type of deed. It doesn’t change your responsibility for the period of time that you owned the property and the party to whom you deed the property doesn’t have to accept it. And for tax purposes, it’s no different than if you transferred the property with a warranty deed.
If you don’t want something, you don’t have to accept it. You should “disclaim” it BEFORE you take possession or otherwise use the property. That way it was never yours and you are not responsible for whatever might have happened.
For federal tax purposes, a disclaimer must be executed within nine months and before you have received any benefit from the property. I don’t know what the requirements of Illinois law are. Note that a disclaimer cannot direct what will happen to the property. Your disclaimer cannot say “I don’t want the property but I want it to go to my cousin or my church.” If you execute an effective disclaimer, the property will pass as if you had died before the deceased.
I am a 25 year New York State title insurance vet. Here goes.
It depends upon the state where the property is situated.
It depends upon whether the decedent died testate of intestate
In New York State a distributee under an intestate estate may formally renounce his/her distributive share by filing a written formal renunciation w/ the surrogate’s court. Likewise a beneficiary/devisee under a Will and Testament may also file a formal written renunciation within nine months after the effective date of the disposition and must include an affidavit stating that the renouncing party has not received and consideration (i.e. $$$$) whose interest would be accelerated.
In either renunciation scenario, the filing, in the eyes of the court, will have the same effect as if the renouncing person had pre-deceased the decedent. That means you can’t change your mind and renounce your renunciation later on.
You must keep in mind that the qaulity of title to the real property which an heir or distributee takes upon the death of the decedent is no better than that held by the decedent immediately prior to death. The title you as heir/distributee is subject to ALL pre-existing mortgages or deeds of trust, judgments, tax liens, encumbering the real estate.
The decedent’s creditors CANNOT go after you and your personal or real property to collect on the decedent’s debts, unless you co-signed or were a guarantor. (the exception is the the extent of the property, real or personal, received by you as distributee/beneficiary under the estate.) In most cases, it is the responsibiligy of the court appointed fiduciary to negotiate pay-offs on the pre-existing liens.
A friend of mine recently lost his wife rather suddenly to cancer. She tended to live on her credit cards and had a substantial debt, around $15,000 I think. Since they were married I guess the husband can be held somewhat libel for it. They had life insurance so it wasn’t a disaster.
Anyway, what surprised me is this: My friend negotiated a settlement with her creditors, getting the $15K down several thousand dollars, however he has to declare the amount reduced as income on his next tax returns. Essentially that money became a gift, sort of.
Makes sense, and maybe its not surprising to some. It just never occurred to me that you’d have to declare it as that.
If his name was on the cards too, he was 100% liable. If not, he was 0% liable. And the tax thing sounds completely bogus to me. This story makes no sense at all.
Boyo Jim:I agree with you completely about the guy’s liability. The fact he did any negotiating with the card issuers pretty well proves he was on the accounts (*de facto *or de jure) anf had the 100% liability.
But you’re incorrect about the debt foregiveness. Debt foregiveness *is *income as far as federal taxation is concerned. If you have a mortgage & the bank writes off a bunch of the balance, that’s income to you. And taxed as such.
Canada is similar to the US as far as debt inheritance goes, but I understand that in Germany, you inherit not only assets, but debts also. Because of this, you can refuse to accept inheritance, but you’ve usually only got something like a month to sort out whether it’s worth it or not.
The common law provinces are similar to the US, but Quebec differs because of its civil law traditions. Debts and assets (the “passif” and the “actif”) can pass to the heirs (there isn’t the concept of the "estate"in civil law of succession), but the heirs can renounce the succession.