What happens to a balloon note when the lender dies?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are there other heirs? Siblings? Presumably an arrangement could be worked out amongst you. Will she likely have a large estate where your share would be 300k or more?

OP here, I do have 1 sibling. He also has a note from her, not for as much, not entirely sure but 100K plus for sure. She will have a large estate, but most of it will not be liquid. She owns a home with a mortgage to a non family member and has other fully owned real estate property. In terms of cash I don't think it will be more than 300K but I assume total assets would be around 1 million.

OP, at the time of your mother's death, your note and your brother's will both be both assets of the estate. Using a discount rate the you and your brother agree on, you can compute the then present value of the stream of interest and principal payments from both notes. You would each then reduce your share of the estate by the then present value of the forgiven notes. So, you brother would get more cash or real estate, while you would get more load forgiveness.

[Anonymous]

Sorry for all the typos.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are there other heirs? Siblings? Presumably an arrangement could be worked out amongst you. Will she likely have a large estate where your share would be 300k or more?

OP here, I do have 1 sibling. He also has a note from her, not for as much, not entirely sure but 100K plus for sure. She will have a large estate, but most of it will not be liquid. She owns a home with a mortgage to a non family member and has other fully owned real estate property. In terms of cash I don't think it will be more than 300K but I assume total assets would be around 1 million.

OP, at the time of your mother's death, your note and your brother's will both be both assets of the estate. Using a discount rate the you and your brother agree on, you can compute the then present value of the stream of interest and principal payments from both notes. You would each then reduce your share of the estate by the then present value of the forgiven notes. So, you brother would get more cash or real estate, while you would get more load forgiveness.

Op I was in this situation and we did this. I "got" the mortgage paid off and he "got" more in cash/equity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are there other heirs? Siblings? Presumably an arrangement could be worked out amongst you. Will she likely have a large estate where your share would be 300k or more?

OP here, I do have 1 sibling. He also has a note from her, not for as much, not entirely sure but 100K plus for sure. She will have a large estate, but most of it will not be liquid. She owns a home with a mortgage to a non family member and has other fully owned real estate property. In terms of cash I don't think it will be more than 300K but I assume total assets would be around 1 million.

OP, at the time of your mother's death, your note and your brother's will both be both assets of the estate. Using a discount rate the you and your brother agree on, you can compute the then present value of the stream of interest and principal payments from both notes. You would each then reduce your share of the estate by the then present value of the forgiven notes. So, you brother would get more cash or real estate, while you would get more load forgiveness.

Op I was in this situation and we did this. I "got" the mortgage paid off and he "got" more in cash/equity.

Great, thank you for this. If you don't mind and have the time, what was the process, was that done via executor, did you guys just agree to it and write something up?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Are there other heirs? Siblings? Presumably an arrangement could be worked out amongst you. Will she likely have a large estate where your share would be 300k or more?

OP here, I do have 1 sibling. He also has a note from her, not for as much, not entirely sure but 100K plus for sure. She will have a large estate, but most of it will not be liquid. She owns a home with a mortgage to a non family member and has other fully owned real estate property. In terms of cash I don't think it will be more than 300K but I assume total assets would be around 1 million.

OP, at the time of your mother's death, your note and your brother's will both be both assets of the estate. Using a discount rate the you and your brother agree on, you can compute the then present value of the stream of interest and principal payments from both notes. You would each then reduce your share of the estate by the then present value of the forgiven notes. So, you brother would get more cash or real estate, while you would get more load forgiveness.

Op I was in this situation and we did this. I "got" the mortgage paid off and he "got" more in cash/equity.

Great, thank you for this. If you don't mind and have the time, what was the process, was that done via executor, did you guys just agree to it and write something up?

To be honest I don't remember exactly. My mother held a balloon mortgage on our house. We had been documenting each payment and interest and knew exactly how much we still owed her when she died (the mortgage was also fully documented legally when it began, using inter family loan rates etc). The executor and the law firm he was working with figured it out based on the mortgage documentation. I do know that my brother got the cash equivalent of the amount we (my husband and I) owed on the mortgage on the day of her death, the mortgage was forgiven, and that the rest of her estate was divided equally. Sorry I can't remember more details!

[Anonymous]

We had a mortgage held by a relative (my grandmother) but it wasn't a balloon note. The heirs each got 1/3 of the note and we just wrote 3 checks each month until we sold the house and then they got the balance of the note back.

[Anonymous]

It will depend on what her will says, but likely you can offset your inheritance by the amount of the debt.

[Anonymous]

OP here- I just learned that my brother, the only other heir, has a balloon note of the same value. So in the end I would owe him the share of my note and he would owe me the share of his note, so I assume it would just even out?