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HELOC Question
Posted on 2/22/17 at 12:35 am
Posted on 2/22/17 at 12:35 am
Had a friend ask me a question and I had no idea how to answer. I am not 100% sure this is what happened, but this is my understanding and if my assumptions are correct, who owes on the HELOC in this scenario and how is the 1/2 interest in the house calculated?
FACT PATTERN
Person 1 owns house without a mortgage and takes out a HELOC before marriage.
Person 1 later gives 1/2 interest in house to Person 2 who is now the spouse (not sure if married before HELOC obtained or after).
Person 2 passes away and leaves 1/2 interest in house to children.
Question 1: Do the children get the 1/2 interest free of the HELOC or do the children also owe on the HELOC?
Question 2: If the HELOC were taken out after the people were married but before the 1/2 interest in house was given, does this change the answer to Question 1?
FACT PATTERN
Person 1 owns house without a mortgage and takes out a HELOC before marriage.
Person 1 later gives 1/2 interest in house to Person 2 who is now the spouse (not sure if married before HELOC obtained or after).
Person 2 passes away and leaves 1/2 interest in house to children.
Question 1: Do the children get the 1/2 interest free of the HELOC or do the children also owe on the HELOC?
Question 2: If the HELOC were taken out after the people were married but before the 1/2 interest in house was given, does this change the answer to Question 1?
3
Posted on 2/22/17 at 2:39 am to TigerGrad2011
Im no lawyer so maybe I'm missing something, but I'm kinda confused by the question.
If the house is liquidated, the lien the HELOC has needs to get paid off.
That HELOC takes away from the value. The stake the other party has is only entitled to half of what's left.
The question of the HELOC's debt needing to be paid out of solely the Person 1's share is where it's gets messy. That probably can go any which way depending on the details of the case, the state in question, the phase of the moon, and if the judge got any the previous night.
Unless Person 1/Person 2 has some sort of legal document detailing how it would be handled.
Moral of the story: If you have anything worth having, and have more than one potential beneficiary, get a pre-nup, will, living trust, etc folks.
You aren't going to get a better answer here as we don't know the precise legal nature of ownership division and rights granted.
I'll comment though it's kinda fricked up to be given a share of a house and then give it to someone else upon your death with the gifting individual is still alive.
If the house is liquidated, the lien the HELOC has needs to get paid off.
That HELOC takes away from the value. The stake the other party has is only entitled to half of what's left.
The question of the HELOC's debt needing to be paid out of solely the Person 1's share is where it's gets messy. That probably can go any which way depending on the details of the case, the state in question, the phase of the moon, and if the judge got any the previous night.
Unless Person 1/Person 2 has some sort of legal document detailing how it would be handled.
Moral of the story: If you have anything worth having, and have more than one potential beneficiary, get a pre-nup, will, living trust, etc folks.
You aren't going to get a better answer here as we don't know the precise legal nature of ownership division and rights granted.
I'll comment though it's kinda fricked up to be given a share of a house and then give it to someone else upon your death with the gifting individual is still alive.
This post was edited on 2/22/17 at 2:56 am
Posted on 2/22/17 at 5:49 am to TigerGrad2011
Did this tangled web of a fact pattern happen in Louisiana or some other state?
Posted on 2/22/17 at 6:15 am to TigerGrad2011
HELOC is paid off at closing before any monies are issued from sale of home. After that debt is settled parties will split proceeds left from sale.
It's not like you get a check and then say "by the way, I've got this HELOC bill for ..."
Banking industry doesn't work like that. Lein is tied to Deed/Property.
It's not like you get a check and then say "by the way, I've got this HELOC bill for ..."
Banking industry doesn't work like that. Lein is tied to Deed/Property.
Posted on 2/22/17 at 7:53 am to foshizzle
It's in Texas and there are a lot of those answers that I didn't get when we were talking about it.
Person 1 has the right to live there but my buddy is worried that he's going to owe money or have the interest that was passed on taken in some manner as Person 1 has already been involved in some questionable issues with the whole situation.
I told him to go talk to an attorney in Texas who specializes in these types of issues, but I still thought it was an interesting scenario.
Person 1 has the right to live there but my buddy is worried that he's going to owe money or have the interest that was passed on taken in some manner as Person 1 has already been involved in some questionable issues with the whole situation.
I told him to go talk to an attorney in Texas who specializes in these types of issues, but I still thought it was an interesting scenario.
Posted on 2/22/17 at 9:55 am to foshizzle
quote:
Did this tangled web of a fact pattern happen in Louisiana or some other state?
FLORIDA?
Posted on 2/22/17 at 12:02 pm to TigerGrad2011
A HELOC is using the homes equity as collateral, so I'd assume only the owner of the home could take out a HELOC. I'm pretty sure additionally that everyone that owns the home is a co-signer on the debt. Therefore, if the couple was married then the heirs would only receive 1/2 the net worth of the house minus the HELOC. If they were single and the guy owned the home outright outside of marriage, then I would assume he also assume 100% of the HELOC.
I don't think anyone else can have a HELOC in their name without being on the deed of the house. I'm not a lawyer, but I have done some HELOC loans.
I don't think anyone else can have a HELOC in their name without being on the deed of the house. I'm not a lawyer, but I have done some HELOC loans.
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