As we are doing estate planning we are coming across this bizarre question. Let's say I currently have 10 mortgages and my wife has 10 mortgages. If one of us were to die, would the other assume the mortgages even though we are maxed out on conventional loans.
Thanks in advance.
Are the mortgages assumable in the first place? What do you mean when you say assume the mortgages, are you saying that she automatically becomes obligated on the note after your death?
The obvious answer would be get those loans and the properties securing them into a business entity structure.
As assets, the businesses become willable.
As properties securing loans, that all stays with the business entities.
Right now, you get money - from rents, etc. - and you pay YOUR mortgages and property expenses. Anything left over is potentially taxable income to you. When you die, your survivors have to deal with the debts not covered by your life insurance (if you have any).
With the properties in a business entity structure, those businesses receive income from properties, pay the property expenses and debt service, and the surplus comes to you as potentially taxable income. The difference is that when you die you can will the businesses to your survivors. The debts stay where they are, and your heirs (continue to) receive the income.
Now, I'm not a financial or legal professional. Your estate planner, accountant and/or attorney can go over this with you and show you how to make it work for you.
I can refer you to some resources, if you need them.
David J Dachtera
We live in AZ which is a community property state. I understand that the total amount of the loan will be due if the property is transferred or sold, but I thought I read somewhere except when it is transferred to the spouse. My question is still if the loans are "transferred" to her after my death, how does that work if she already has 10 conventional loans in her name. Will there be an issue with her taking over the loans? Given that she already has 10 conventional loans, she can't acquire additional conventional loans, correct?
I'm reading your question as two different things. I'm assuming that the properties are not held in a trust? I'm also assuming that you are not jointly on title? When you reference title transferring to your spouse upon your death that has nothing to do with who is obligated under the terms of the existing notes on those properties. So, if title transfers to your spouse the loans are not automatically transferred to her. I do know that general terms and language in notes and deeds of trust contain provisions for acceleration of the debt, unless it is prohibited by applicable law. You should talk to an estate planning attorney and get everything in order with them.