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Wednesday, February 1, 2012

Can a creditor of my Dad's estate force Mom to sell the house?

This reader sent in a question that I think will look familiar to many of you. It has to do with debts in one parent's estate and how they affect the surviving parent.

Hi my dad is very ill and wont likely be with us much longer I am afraid. Our problem is he owes a lot in credit card debt, solely his debt. The only asset in his estate is the house he and my mom share. It is fully paid for, mortgage free, and her principal residence. Both names are on the title. We are afraid the credit card company can take the house as she cant make the payments on the balance owing to them. Any idea what our options may be?

I'm very sorry to hear about your Dad. It's too bad that financial worries have to make this time, which is already hard enough on people, even harder, but of course you are worried about your Mom.

First of all, even if your Mom was in a position to pay your Dad's credit card debts, she wouldn't have to, as you've said it was his credit account only. At the risk of annoying readers who might work at credit card companies, I'll tell you straight up that some - not all - credit card companies tell widows that they are responsible for their deceased husbands' debts even when they are not. I've personally seen it time and time again. They do it because the widows pay often enough to make the misrepresentation worthwhile for the credit card company.

Your father's estate is responsible for his debts. Your Mom is not responsible for your Dad's debts when they are his alone, as opposed to joint debts. If there isn't enough in the estate to pay all the debts, then unfortunately they don't get paid. Not the best for the creditor, but that's the way it is. When there is not enough money to pay both debts and beneficiaries, the debts have to be paid first and the beneficiaries lose out.

This leads us to the question of whether the credit card company can force the sale of the house.

The answer lies in whether the title to the house is in joint names between your Mom and Dad, that is, joint tenants with a right of survivorship. The other possibility is that they are tenants in common, with each owning half. You say that "both names are on the title", but that alone is not definitive, as both names would be on it whether they were joint tenants or tenants in common.

I haven't seen the title of course, but it is extremely rare that husbands and wives are tenants in common. They are almost always joint tenants and I suspect that your parents are too. If your parents don't have a copy of the title handy, you can find out for sure by going to the local Land Titles Office and asking for a title search. You should have the legal description of the property for this. You can find that on the latest property tax assessment notice. If you are reading the title and are still not sure, ask the staff at the Land Titles Office, or call a lawyer and ask.

If the house is held as joint tenants, the house will not be in your father's estate and will not be available to creditors. When one joint tenant dies, the other automatically owns the house by right of survivorship and the house never passes through the estate. The title is changed by going to the Land Titles Office with a death certificate (no probate needed as the house isn't in the estate).

Everything is different if they are tenants in common. In that case, half the title to the house would fall into your Dad's estate and be available to pay his debts. This would more than likely mean that your Mom would have to sell the house.

I hope you and your Mom can gain some peace of mind at this very difficult time by checking the title. At least your Mom won't have to worry about losing her home. My thoughts are with you.

1 comment:

  1. Hi, thanks for this great information.

    My father and I are joint owners of our house in Ontario. He has recently been sued as a result of his involvement in a car accident.

    I expect his insurance company will cover the liability, but if for some reason they do not, or if the judgement exceeds his liability coverage, can the plaintiff compel the sale of our house to satisfy the judgement?

    Thank you again.


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