Can wife still claim mortgage interest after husband dies ( husbandon mortgage, but both on deed)

Discussion in 'Financial Planning' started by Mike rock, Dec 15, 2011.

  1. Mike rock

    Mike rock Guest

    We just refinanced our home and only I am on the mortgage, but both
    wife and I are on the deed. I know there are some advantages of doing
    this, but one thing I thought of is that if I should die, and if my
    wife continues to make payments, can she still deduct mortgage
    interest on her tax returns?
     
    Mike rock, Dec 15, 2011
    #1
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  2. Mike rock

    Alan Guest

    On 12/15/11 11:00 AM, Mike rock wrote:
    > We just refinanced our home and only I am on the mortgage, but both
    > wife and I are on the deed. I know there are some advantages of doing
    > this, but one thing I thought of is that if I should die, and if my
    > wife continues to make payments, can she still deduct mortgage
    > interest on her tax returns?
    >

    Before concerning yourself about interest tax deductions you have to
    focus on what happens when a mortgagee dies. This is subject to 3
    things: 1. What are the terms of the mortgage? 2. What is the state law?
    3. Was there a will that specified what should happen to the mortgage?

    Assuming that there is either no will or nothing specified about how the
    debt she be handled in a will, then the mortgage terms and state law
    dictate what happens to the loan. The debt becomes part of the
    decedent's estate. Typically, the bank has the right to call the loan
    unless there is something in the mortgage terms that allows the loan to
    be assumable by the survivor or state law allows it to be assumable. If
    not, the bank can call the loan and expect the Estate of the Decedent to
    pay it off. What usually happens is that the bank allows the surviving
    spouse to take over the loan. You need to find out what the loan
    actually says about it being assumable by a surviving owner. Or if it
    says nothing, you need to find out what your state law says about it.
    You would also need to see what your state law says about whether a bank
    can take the surviving spouse's property that is being used as a main
    home. Many states don't allow it.

    Getting back to the original question as to whether a surviving spouse
    who owns the home can deduct mortgage interest payments made on a loan
    that the surviving spouse had not signed: To be able to deduct interest
    on a mortgage, the person making the payment must show that 1. The loan
    is secured by the home. 2. If the loan is defaulted, the property can
    satisfy the debt. 3. The person has an ownership interest in the home.
    4. The loan was recorded with the proper authorities as specified by
    state law (typically, the county in which the home is situated).

    Assuming the loan had been properly recorded, the surviving spouse would
    meet the 3 other requirements. The home is still security for the debt.
    Failure to make the payments would put the loan in default and the
    survivor could lose her property. As such, the interest payments would
    be deductible. Please note that this is true even though the debt
    belongs to the Estate of The Decedent. In addition, as the owner, any
    property tax paid by the surviving spouse would also be tax deductible.
    --
    Alan
    http://taxtopics.net
     
    Alan, Dec 15, 2011
    #2
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  3. Mike rock

    Don Guest

    Re: Can wife still claim mortgage interest after husband dies (husband on mortgage, but both on deed)

    On Dec 15, 10:00 am, Mike rock <> wrote:
    > We just refinanced our home and only I am on the mortgage, but both
    > wife and I are on the deed. I know there are some advantages of doing
    > this, but one thing I thought of is that if I should die, and if my
    > wife continues to make payments, can she still deduct mortgage
    > interest on her tax returns?


    When spouses attempt creative financing with respect to tax and other
    matters, another thing that should be taken into consideration is the
    possibility of divorce. The divorce rate nowadays is close to 50%. It
    would seem that a future event that could happen with such a high
    probability most certainly should be considered when doing financial
    planning. So a related question is, with one spouse on the mortgage
    and both spouses on the deed, what would be the situation after a
    divorce?
     
    Don, Dec 16, 2011
    #3
  4. Mike rock

    Alan Guest

    On 12/15/11 7:32 PM, Don wrote:
    > On Dec 15, 10:00 am, Mike rock<> wrote:
    >> We just refinanced our home and only I am on the mortgage, but both
    >> wife and I are on the deed. I know there are some advantages of doing
    >> this, but one thing I thought of is that if I should die, and if my
    >> wife continues to make payments, can she still deduct mortgage
    >> interest on her tax returns?

    >
    > When spouses attempt creative financing with respect to tax and other
    > matters, another thing that should be taken into consideration is the
    > possibility of divorce. The divorce rate nowadays is close to 50%. It
    > would seem that a future event that could happen with such a high
    > probability most certainly should be considered when doing financial
    > planning. So a related question is, with one spouse on the mortgage
    > and both spouses on the deed, what would be the situation after a
    > divorce?
    >

    What's in the divorce decree?

    --
    Alan
    http://taxtopics.net
     
    Alan, Dec 16, 2011
    #4
  5. Re: Can wife still claim mortgage interest after husband dies (husband on mortgage, but both on deed)

    On Dec 16, 2:37 pm, Alan <> wrote:

    > What's in the divorce decree?


    Are you saying that the decree would specify who retains the property
    and who pays the mortgage after the divorce? I presume that it would
    depend on what the court decides. My point is that the spouses in
    their original financial planning should at least envision the
    possibility of a future divorce before deciding upon how ownership of
    the property and responsibility for the mortgage debt is assigned when
    buying the house.
     
    Donald Zimmerman, Dec 17, 2011
    #5
  6. Mike rock

    Alan Guest

    On 12/17/11 10:50 AM, Donald Zimmerman wrote:
    > On Dec 16, 2:37 pm, Alan<> wrote:
    >
    >> What's in the divorce decree?

    >
    > Are you saying that the decree would specify who retains the property
    > and who pays the mortgage after the divorce?


    Yes, it could.

    I presume that it would
    > depend on what the court decides. My point is that the spouses in
    > their original financial planning should at least envision the
    > possibility of a future divorce before deciding upon how ownership of
    > the property and responsibility for the mortgage debt is assigned when
    > buying the house.
    >



    --
    Alan
    http://taxtopics.net
     
    Alan, Dec 18, 2011
    #6
  7. Mike rock

    Don Guest

    Re: Can wife still claim mortgage interest after husband dies (husband on mortgage, but both on deed)

    On Dec 17, 5:29 pm, Alan <> wrote:

    > Yes, it could.


    A financial plan for a married couple that depends on their marriage
    lasting permanently can be expected to be useless 50% of the time.
     
    Don, Dec 18, 2011
    #7
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