Dear Mr. Premack: My son has just married, and he and his wife purchased their first home. They have a sizeable mortgage. Unlike them, my husband and I who have been married over 30 years now have finished paying off our house and own it free and clear. We told them that now that they have a house they need to see a lawyer about Wills but they think the mortgage means they don’t really own the house until it is paid off like ours. How do mortgages affect home ownership, and should they have Wills in case either of them should be in an accident? – H.Z.
When most people buy a home, they need to borrow the money to pay for the home. The transaction is between three parties: the seller, the buyer and the lender. In exchange for full payment of the home’s value, the seller signs a deed making the buyer the new homeowner. But to get the money to pay the seller, the buyer had to borrow the money from the lender. The lender requires the buyer to sign a promissory note and a deed of trust (which is the legal label for what many people casually call a mortgage).
The promissory note contains the terms of the loan. The deed of trust is a security instrument which gives the lender authority to foreclose on the house if the loan is not repaid (or if other conditions are not met, like keeping the home insured and the taxes paid). Thus, although your son and his wife have a mortgage they are indeed owners of their home, even though they agreed to give a lien against the house to secure repayment of the purchase money loan.
They own their home. You own your home, albeit free from the mortgage lien burdening their home. You each have a deed to your home recorded with the county clerk that says you own it. Almost universally, when a husband and wife own a home in Texas, the deed makes them joint tenants, and their ownership interest is held as community property. Almost universally, the deed does not contain any wording about what should happen if one of the spouse-owners should die.
If you assume that when your spouse dies you simply continue as owner of the entire home, you may be very wrong. True, there is a Texas statute that says when one spouse dies the other spouse receives title to the community property. But that is conditional. It only happens that way if 1) there are no children from any prior marriage, and 2) if the surviving spouse jumps through many legal hoops to prove that he/she should become the legal owner. Nothing is automatic. Title does not transfer by itself, and the legal proceeding to establish ownership for the surviving spouse can be slow and expensive.
The legal outcome is much better when a homeowner has a Will. If you own a home, you should have a Will that states to whom you want your share of the house to pass if you die. Period. To be a responsible adult you simply must address this issue.
The Will is only as good as the words it contains. Every day you go to work, giving your best efforts and your precious time. Then you get a paycheck, and you spend a large part of that paycheck on your house payment. To keep the house, you must work to earn the money to pay the lender. Your equity in the house grows as you make the payments. Your house has value, and if you die that value must be preserved and passed to your selected heir under the wording in your Will.
Because the wording of your Will matters, you should always go to a real live qualified Texas lawyer. Do not make a Will online unless that online service connects you directly with a real live qualified Texas lawyer. Services like LegalZoom fail in almost every way (they are cheap because you are getting legal services from a computer program, not from a lawyer). If your home is important to you, if the time you spend earning the money to pay for the home is important to you, if you want to protect your spouse in case of your death, then you need to see a real live qualified Texas lawyer and make a valid, effective Texas Will as soon as possible.
Paul Premack is a Certified Elder Law Attorney practicing estate planning for all ages and probate law in San Antonio.
Original Publication: San Antonio Express News, May 14, 2012