What Happens to the Property Taxes When a Homeowner Passes Away?
Who is responsible for paying taxes for a deceased person? The homeowner should clearly state who the responsible person is in their estate planning documents, as it will ease the burden of the loved ones they leave behind. Property tax is only one of the tax liabilities at death and becomes part of an estate like other debts such as car payments. Who might be nominated to pay the taxes, and what happens if one dies without a will?
Who is Responsible for the Property Taxes When Someone Passes Away?
Are you wondering who is responsible for property taxes after death? It all depends on what is written in the deceased person’s will or who inherits the property. Let’s discuss a few possibilities.
- An Executor or Legal Representative
If a will exists, it normally includes a person named as executor who administers the estate; and the court appoints a legal representative if there is no will. Whether an executor or legal representative, they are responsible for paying the property taxes as long as the property is part of the estate. Property can also pass to heirs via state law without probate.
- A Trustee
Was the property held in trust when the owner passed? It is not part of the will or probate process, and a trustee is responsible for paying the property taxes, as per the trust documents, until the house passes to an heir.
- A Beneficiary
Has a beneficiary taking legal title to the home been named in the will? Until the legal title is transferred, the estate pays the property taxes. Thereafter, the new owner is responsible.
- An Heir
Did the person die without a will? They are deemed to have died “intestate,” and the court, if applicable, will dispose of the property, after paying all debts, by distributing it to the applicable relatives or “heirs.” Or, property can pass via the laws of intestacy without a court process with the filing of affidavits of heirship. In either case, the heirs are then responsible for paying the property taxes. As a property tax lender, we deal with these issues frequently and can help you as part of your loan process.
- The County the Property is Located in
What happens when a homeowner dies without a will, and there are no relatives close enough to qualify under the state’s intestate laws? The property will “escheat,” and the county where the property is located takes legal title to the home, subsequently becoming responsible for paying the property tax.
- What Happens with Mortgaged Properties?
If a property is mortgaged, the lender may require the homeowner to maintain an escrow account dedicated to paying property taxes. In this instance, the lender pays the taxes as long as the mortgage is paid. Did you know you cannot defer property taxes if you have a reverse mortgage?
Important Considerations to Keep in Mind
One of the first considerations to remember is when an estate does not have enough money to pay all the debts, including the property taxes, a court may order the house to be sold to make the payments. Homeowners, 65 years of age or older, and disabled persons can defer their property taxes until their estates are settled after death, based on Texas Tax Code, Section 33.06. A surviving spouse between the ages of 55 and 65 can apply for the deferral to continue, but the property taxes keep adding up, including interest and penalties. When the spouse also passes away, the estate must pay all deferred property tax debts. In these cases the heirs have only 180 days before collection actions begin to recoup the deferred taxes. Many property tax loan borrowers find themselves in this position and utilize a property tax lender to assist them in paying off this debt.
What to Do if You Have Inherited a Property With Delinquent Taxes?
Are you the legal heir to an estate and inherited property with delinquent taxes? There are a few actions you can take to solve the problem, although they are not all likely to be equally effective. Unfortunately, something will have to be done. You cannot simply ignore the problem and hope that you won’t have to deal with it. As the inheritor of the property, all of its effects, including its outstanding property taxes, will become your concern. It is also important to act immediately. Not only will those penalties and interest charges continue to accrue, but tax authorities often accelerate foreclosure procedures once a property owner has died.
Let’s take a look at the three possible ways you could choose to settle the debt.
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Sell the property: If you decide that you no longer want to hold onto the property - or if financial considerations force you to make this choice - then the best thing to do is finalize a sale as soon as possible. The proceeds from the sale can then be used to pay off any debts, including the taxes that have accrued to the property. The only problem with this is that, depending on the extent of the debt, there may not be much left over once everything has been paid.
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Rent the property: You could choose to turn the home into a rental property and generate ongoing monthly income. This revenue could then be used to cover the outstanding taxes. However, you would need to think very carefully before choosing this route. If the property tax debt is quite high, the rental income may not cover it, or everything the property earns may be consumed by property taxes without leaving anything over. Also, the property will continue to accrue taxes, as well as penalties and interest. Your rental would have to be enough to cover this mounting expense. Most likely, you would have to make a payment arrangement with the local tax authorities or apply for a property tax loan.
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Apply for a property tax loan: If you rent the property, you may have the same problem, especially since taxes will continue to accrue. All things considered, the best decision would be to apply for a property tax loan from a reputable lender like American Finance & Investment Co. Inc. (AFIC). A property tax loan is easy to acquire and immediately eliminates the debt owed by the property owner to the applicable tax authority. You can then make a repayment arrangement that suits your budget and schedule. Having set up this repayment plan, you have more freedom as to what you get to do with the property. You may choose to live there, or you could rent it out, knowing that there is no rising debt to eat away at your rental revenues.
We offer our clients an affordable, hassle-free way to ensure that your account with the local government tax office is paid in full and will work out a manageable repayment plan for you. AFIC can provide you with an instant quote by completing the form on our homepage. For qualifying properties, we can help you pay off your delinquent taxes and offer you the following benefits:
- Quick and completely online process
- No money down
- No credit check
- Free 30-day rate match
- Match competitors and beat their rate by 1%
- Avoid high penalties and foreclosure
AFIC is a family-owned business that has been providing financial services and support to Texas homeowners since 1946. We understand the needs of Texas families, as well as the anxieties and frustrations that come with being a homeowner in our beautiful state. We stand apart as a property tax lender with a complaint-free, 65+-year Better Business Bureau track record. Our equity funding ensures that we are not reliant on 3rd-party banks or other institutions. We pride ourselves on finding solutions to suit the unique needs of our clients. If you would like to discuss our property tax loans, please contact our experienced team at AFIC today.
