Surviving Spouse House Sales

Credit Crisis Created Special Problems for Widows and Widowers

Nov 5, 2008

The surviving mate is often left with a house he or she does not need, does not want, cannot afford and cannot sell. Here's a look at some options.

When an elderly husband or wife dies, the surviving spouse is often left to live alone in a house which is larger than one person needs, larger than an elderly survivor can maintain or afford to maintain and which may hold lingering emotional problems for the survivor. The 2007-08 housing market collapse and the 2008 credit crisis aggravated those conditions by making it much more difficult to sell the house.

In some parts of the nation, houses can go unsold for a year or more. Meantime, mortgage, tax, maintenance and repair bills continue to eat at the widow or widower’s financial nest egg.

Even tax exemptions on the sale of a house were threatened since the IRS required the home to be sold within the tax year of the spouse’s death. In late 2008 Congress recognized the new difficulty of selling houses and extended the exemption deadline to two years after the death.

Social Security Payments Decrease

Death of a spouse may also result in the loss of crucial income, including salaries, pension payments and hospitalization insurance from previous employers and/or Social Security payments. The Social Security Administration (SSA) not only halts the payments, but is likely to demand the return of checks which might have been sent in error shortly after the death occurred.

According to SSA, when both husband and wife were receiving Social Security, the agency will change the payments to survivor benefits and pay the surviving spouse the higher benefit. However, that benefit is likely to be less than the total of the two spouse’s benefits.

The loss of income may leave no funds for making the house ready for market. Real estate agents usually encourage sellers to paint, touch up, make minor repairs and spruce up the lawn and gardens before putting a house up for sale. Older survivors may not be able to perform some of these tasks themselves. They should consult with the real estate agent on which improvements will impact the sale.

Bank Accounts Temporarily Frozen

The financial problems can be particularly tough if the spouse’s death comes with little or no warning. Unless the couple had prepared unusually well, their bank and other financial accounts are likely to be temporarily frozen until proof of death is established and processed.

Life insurance payments help some surviving spouses to weather these challenges. But even those payments can be delayed by extensive paperwork requirements.

Reverse home mortgages provide a helpful option for some survivors, assuming that they are at least 62 years old. The federally-supervised program allows the owner to take a loan against the home. It does not have to be paid back until the house is sold, or until the owner dies or moves out of the house.

Reverse Home Mortgage Payments

According to the Department of Housing & Urban Development (HUD), the money can be received in four ways:

To protect the applicant, HUD requires the owner to complete a 45-minute session with a federally-approved reverse mortgage counselor. The mortgages can be made only through federally designated banks. Equity in the house will decrease unless market appreciation exceeds the principal and loan interest deductions.

However, a reverse mortgage can provide needed income when the house cannot be sold. It also can allow the owner to hold the house until it can be sold in a healthier housing market.

The copyright of the article Surviving Spouse House Sales in Senior Finances is owned by Carroll Trosclair. Permission to republish Surviving Spouse House Sales in print or online must be granted by the author in writing.