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How To Avoid Probate (Will Substitutes)

Effect Of Method Of Transferring Assets On Lien Holders

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A "lien holder" is a person or entity that has an interest in property as security to repay a debt. For instance, a mortgage company is the lien holder on a house to the extent of the outstanding debt secured by the residence.

Transfer of title, even due to death, does not generally extinguish the debt or the lien. If the terms of the lien so provide, death may trigger a forced sale. If that is the case, the new owner receives the difference between the sale price and the debt.

Otherwise the new owner receives the property subject to the lien.

For example, if you have a house worth $200,000 and owe the bank $100,000 on the house when you die: the bank continues to have the interest to the extent of $100,000 in the property no matter who becomes the owner. The new owner takes over the debt.

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