3 Tips to Protect Your Family from Foreclosure During Probate

Law Blog

If you have a parent or sibling who passes away, you will need to wait until probate has passed until you can perform any transactions on the family house including selling, tenanting or re-mortgaging the house. Probate is a process of advertising the dissolution of an estate and appointing an heir, which occurs when the estate is worth more than $20,000. You need to apply for probate through the Supreme Court and this process can take several weeks.

Here is how to protect your family home from foreclosure in the meantime.

Send the bank a letter through your lawyers

By officially informing them of the death of the client, this sets into motion the internal processes to seal accounts. This prevents any unauthorised withdrawals from accounts such as a mortgage, but any joint account holders will still be able to access funds from the joint accounts.

If there is adequate money in the transaction accounts they can use this to service mortgage until you achieve probate, and some banks may offer the ability to place the mortgage on a break and let the interest accrues whilst you are finalising the estate. This should stop any foreclosure processes in the short term.

Meet with other beneficiaries

If you are in a situation where there maybe multiple beneficiaries (which is common in family settlements), have a formal meeting to discuss what you will do to maintain payments on any loan amounts. One person may lend money to the estate on a temporary basis, in order to keep servicing the mortgage if everyone cannot contribute evenly or there is some confusion over how the estate may be split. It can often be advisable to get your lawyer to attend this meeting so there is a third party record of what has been agreed to.

Release the house

In Australia, loans are tied to an underlying asset. If your house is now worth less than the loan amount, you are only obliged to return the property and cannot be personally pursued for any extra amounts, as you did not take out the loan. However if you wish to take on the mortgage, a valuer will take a new valuation of the property and you will likely be required to pay out the full mortgage to take out a new mortgage on the property, and contribute capital to make the loan match the asset value.

If you are currently settling an estate including a family home, it is extremely wise to seek legal advice from an experienced law firm such as Michael Atkinson & Associates.


22 June 2015

Marriage doesn't have to be a life sentence

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