Asset transfers may present unique estate planning issues

Readers of this estate planning blog know that having a will or trust in place might spare loved ones from administrative hassle. Yet individuals may still have questions about whether certain types of asset transfers may present unique obstacles of their own.

For example, a recent article highlights a situation that might apply to many homeowners: an inherited property with a mortgage and a potentially aggressive lender. Readers may wonder whether the lender can enforce a due-one-sale clause in the mortgage contract.

Fortunately, a federal law called the Garn-St. Germain Depository Institutions Act offers protection. When a relative inherits real property and occupies that residence, the law prohibits the lender from enforcing any due-one sale clause. An attorney that focuses on estate planning could provide additional details about this law.

Individuals may also be concerned about medical costs depleting their estate and leaving heirs without an inheritance. Yet programs like Medicaid may impose financial-need limits on eligibility, essentially requiring an individual to deplete his or her estate before receiving assistance. Nor may long-term care insurance be the answer, as premiums can be very expensive, and there’s no guarantee that long-term insurance coverage will keep pace with inflation or be enough to protect an estate’s assets from the reach of creditors.

Rest assured, there are estate-planning tools available. An attorney might recommend a power of attorney, a health care proxy and a living will to prepare for the possibility of catastrophic illness or disability. Life insurance might also be advisable to provide sufficient survivor income for loan repayment, capital needs and various estate settlement expenses. To avoid probate but retain control of assets, titling one’s assets in the name of a revocable living trust might also be appropriate.

Source: Washington Post, “Real Estate Matters: What happens when you inherit a property with a mortgage?” Ilyce R. Glink and Samuel J. Tamkin, Oct. 17, 2014