When individuals pass away, their assets are left to their heirs (next of kin) or individuals listed in a will, trust, etc. These assets will oftentimes include real estate. Sometimes, this real estate has liens against it. When it does, the recipient of the property might ask: “Am I responsible for these liens or the debts of the person that passed?” The lawyer answer is “yes and no”.
Typically, surviving individuals are not liable for sole debts of a passing individual (certain exceptions exist for a surviving spouse regarding specific expenses incurred by a passing spouse but we won’t muddy the water with this one today). So, if your aunt passes and you are her sole surviving heir and she has insufficient assets to pay the bill, you are not responsible for it. However, if you are her sole surviving heir and she has assets sufficient to pay the bill, then it is typically paid out of the estate and the difference is paid to you.
On the other hand, liens on real estate are different and follow the real estate. So, if an individual has borrowed money to purchase a house and the bank has taken a mortgage (lien) and the property is transferred, that mortgage follows the house. So, if your passing aunt also left you a house with a mortgage you will own that house subject to the mortgage. If your aunt did not also leave specific funds to satisfy the mortgage, you will either need to pay the debt associated with the mortgage or the bank will take the house from you, sell it, satisfy the debt and pay you any difference. This process of a bank taking real estate to satisfy its debts is known as a “foreclosure.” The process is time consuming and costly and interest will most typically continue to accrue during the interim. These additional costs will be collected from proceeds from the sale of the house. Conversely, you may also sell the house yourself and pay the underlying debt and most often save substantial equity in the real estate that would have been wasted in a foreclosure.
Again, an individual is not typically liable for the sole debts of a decedent (mostly, as stated above) but may choose to pay the debts of a decedent in order to protect equity in property received from a passing individual. One of our roles at Tallgrass Title is to find and potentially clear liens on real estate being inherited. This process can often be confusing. Our title professionals are available to answer questions during this process. It’s our job!