[WSBAPT] Spouse died with HELOC and left interest in home to children

[Eric Nelsen]

Any gift of property by Will that is subject to a secured debt, is received by the beneficiary subject to that debt. RCW 11.12.070<https://app.leg.wa.gov/RCW/default.aspx?cite=11.12.070>. So I would say yes, after date of death, the obligation to pay the HELOC is 50% on the kids. Post-death, they are effectively tenants in common with the spouse.

I don't think that spouse needs to file a creditor claim against S's estate, though, as I think you are talking about the spouse's equitable right of contribution from the kids, for post-death payments on the HELOC. That's not an estate debt.

Of course the debt secured by the HELOC originated as a pre-death debt, but again, spouse doesn't file a creditor claim because the spouse wasn't owed money by S pre-death. If the HELOC lender files a creditor claim, the debt is preserved as a general debt of the community. If not, then the lender retains its secured interest but can't pursue payment of the debt from the estate generally. RCW 11.40.135<https://app.leg.wa.gov/RCW/default.aspx?cite=11.40.135>.

If the probate of S is still open, then the PR has to decide what to do about the community debt secured by the HELOC. There's no obligation to pay it in full under the loan terms, I assume. So if the estate doesn't pay it, I would argue that the kids and the spouse have to each pay 50% of the debt going forward. The spouse is obligated anyway, and the kids have an equitable obligation because they now own half the property as tenants in common.

I suppose the PR has the option of paying it in full, using community assets subject to the probate. But in that case, the situation gets more complicated, because that would be voluntarily paying a debt that isn't due yet. It might set up a potential conflict between S's Will, which probably says that debts should be paid from residue of the estate, and RCW 11.12.070, which says that the kids receive 50% of the house subject to the debt. So if the estate pays off the HELOC, one could argue that it should only do so if the kids agree to pay 50% of the debt.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of David Faber
Sent: Thursday, October 15, 2020 11:52 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Spouse died with HELOC and left interest in home to children

List,

(C)lient and deceased (S)pouse co-owned real property with a HELOC of about $50,000 secured against title. S died in 2019 and left S's interest in the real property to children from a prior marriage. C has been paying on the HELOC since 2019. Can C file a creditor claim for the 1/2 of the HELOC attributable to S?

Best,
David J. Faber
Faber Feinson PLLC
210 Polk Street, Suite 1
Port Townsend, WA 98368
(360) 379-4110

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