DEAR BOB: My wife and I divorced last year. Her name is still on the mortgage. She wants her name taken off. She signed a quitclaim deed. I sent this to the mortgage company asking them to take her name off. I do not want to refinance because the mortgage has a good interest rate. The mortgage company refused to remove my ex-wife from the mortgage obligation. Is there any way to do this without refinancing or selling? –Michael T.
DEAR MICHAEL: No. There is nothing your ex-wife can do to get her name off the mortgage obligation. If she had a good divorce attorney, he or she would have insisted you refinance in your name alone so she could be free of that mortgage obligation on her credit reports.
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Since that wasn’t done as part of the divorce agreement, although your ex-wife’s name is off the title after you recorded that quitclaim deed, her name remains on the mortgage until you refinance or sell. If you make the monthly payments on time, that will reflect well on her credit reports and FICO (Fair Isaac Corp.) credit score.
NO REAL DIFFERENCE BETWEEN LIVING TRUST AND AN INHERITANCE
DEAR BOB: My grandmother passed away a few months ago. She owned a free-and-clear house. As part of her living trust, my two sisters, my dad, his three sisters and I are to sell the house and divide the profit evenly. What is the difference between a living trust and an inheritance? Are they taxed differently? –Elizabeth C.
DEAR ELIZABETH: Be very thankful your grandmother wisely held title to her house in her living trust. The result is probate court costs and delays are avoided.
Since you and the other heirs inherited the property, you are entitled to a new “stepped-up basis” to market value on the date of your grandmother’s death. The fact she held title in her living trust is irrelevant. You still get the stepped-up basis. That means if the house sells for the same market value, no capital gains tax will be due.
However, if your grandmother died in 2006 and if her total net estate exceeds $2 million, then an estate tax might be due before title to the house can be distributed to the heirs to sell. For full details, please consult your tax adviser.
WHAT HAPPENS AFTER CARRYBACK MORTGAGE LENDER DIES?
DEAR BOB: You had a recent item about home seller carryback mortgages. You cited an advantage is the seller can foreclose if the buyer defaults. But what about a buyer whose sellers carried back the mortgage and they die? How is the buyer protected? –Kathy S.
DEAR KATHY: After the seller-lender dies, the home buyer continues making monthly mortgage payments to either the estate or to whomever inherited their assets.
When the mortgage is fully paid off, either the estate executor or the heirs will execute a Satisfaction of Mortgage or a Deed of Reconveyance to clear the loan obligation from the title. In other words, the death of the mortgage carryback seller-lender is not a big problem for the home buyer who obtained the seller financing benefits.
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