Can a Property Remain in the Name of a Deceased Individual?

A mortgage can stay in place after the borrower dies, but many mortgages contain a due-on-sale clause, which lets the lender, at its option, declare the loan due if the property is sold or transferred without the lender's prior written consent.

Section 1701j-3 of title 12 of the U.S. Code, part of the Garn-St Germain Depository Institutions Act of 1982, limits enforcement. For a loan secured by residential property with fewer than five dwelling units, a lender may not exercise a due-on-sale clause because of:

• A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety.

• A transfer to a relative resulting from the death of a borrower.

• A transfer where the spouse or children of the borrower become an owner of the property.

• A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.

Federal regulations apply these limits to a home occupied or to be occupied by the borrower. For a transfer to a relative after the borrower's death, or to the borrower's spouse or children, the new owner must also occupy or plan to occupy it.

These rules do not cover every property or transfer, and they limit only the lender's right to call the loan early. They do not erase the loan balance.