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Is leaving someone your home as beneficial as it seems?

On Behalf of | Dec 10, 2021 | Estate Planning |

You are a homeowner, so you write in your estate plan that your daughter gets your house while your son gets the money in the bank.

If you have not paid your home off in full, technically, you do not own the home. The bank or mortgage lender does. Your daughter will not become the owner. Rather they will replace you as the mortgage holder. Once they pay the outstanding mortgage off, yes, the house will be theirs, but until that point, it belongs to the lender.

You may hope to die in old age long after you have paid your mortgage off, yet it is wise to have plans in place in case you do not.

If you have $200,000 in the bank now, your son will get that if you die tomorrow. Yet while the house is valued at $200,000, if you have only made half the payments, the real value of what your daughter gets should you die tomorrow is much less.

Houses can come with extra costs

If your daughter does not have the means to continue with the mortgage payments, she may need to sell to avoid the lender foreclosing because she defaults on payments. Running a house also has certain costs that money in the bank does not. For example, you do not need to pay for electricity and water for money in the bank. Nor do you need to pay someone to repair the roof or mow the lawn.

While leaving someone your home can give them a leg up in life, it could also place a financial burden on them that they cannot support. Having support to understand the consequences of particular estate planning choices can help you make a decision that benefits your family as much as you intend.

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