Q: My son in law passed and i have legal custody of both of his children and i'm representing the estate can we rent the
home without transferring the loan?
Yes, the property can be deeded through the estate to the minor children, and the lender on the mortgage may not accelerate the loan or declare the loan balance due, but must accept continuing mortgage payments made on their behalf; however, the mortage lien remains on the property, so nonpayment will result in foreclosure.
While real property can be conveyed directly to a minor, property owned by a minor cannot be sold, mortgaged, refinanced or otherwise encumbered without the appointment of a guardian through the Circuit Court in the county where the property is located. This means that if you need to sell or refinance the property, someone will have to be appointed by the court as guardian for the estate of the minor, even if a parent, in order to act on the minor’s behalf. Even a parent has to be appointed guardian of the minor child’s estate, which involves a court process, and will cost attorney’s fees and court costs. Additionally, all rental income, expenses and/or sales proceeds of the property until the minor turns 18 must be accounted for by the guardian for the minor’s benefit and submitted for audit to the court in regular periodic accountings. If any of the money is used, it has to be done for the benefit of the minor and you have to have specific court approval to spend it.
Second, once the minor turns 18, they are under no obligation to follow your instructions with regard to the property. You may have the intention that they have income from the rental for years to come. When they turn 18, they are under no obligation to follow your intentions, and can sell the property under their own terms.
Finally, there are practicalities of living in or managing property owned by a minor. Minors will need adult help with routine repairs, payment of taxes, and general upkeep. Consider getting utilities service. Utility companies require proof of ownership and conduct credit reports to start service, so it may be difficult to get utilities turned on. You would need a court order through the estate of the minor child to have utilities put in their name. Minors cannot enter into contracts, so homeowners' insurance contracts, rental leases, depositing rent checks, holding security deposits, setting up bank accounts, hiring plumbers, roofers, or other contractors for repairs, etc., all require an adult guardian appointed by the court. Appearing in Landlord-Tenant court to pursue collection or rent or eviction proceedings against nonpaying tenants presents similar obstacles.
You should seriously consider why it is you want this property rented out as opposed to sold and the proceeds held and invested in a custodial account for the children until they reach the age of majority. Is your purpose solely in the best interests of the children alone, as the law requires, or is there some other person's interest involved that seeks to benefit as well when the better option for the children is to sell the home? If the latter, then that would be improper and a violation of the fiduciary duty owed to the minor childen in the management of their assets in their sole best interest.
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