What Can We Learn From UK’s Aristocrats’ Rights?

Hear ye, hear ye—Just this week, Britain’s parliament approved legislation to remove the remaining “hereditary peers” (92, give or take a powdered wig) from the House of Lords. Thus endeth a 1,000 year-old system of aristocratic ​seats in the upper chamber of government secured by birth. Yes, until recently one could inherit the right to legislate in the UK.  They call it a hereditary seat!

So, what can we learn from this end of an heir-a?

We can talk all about inheriting a mortgage debt. The rules regarding inheriting real property (a house or condo) are fairly straightforward and avid readers of this newsletter have all the deets. But, what happens when a property comes with a mortgage? Does that entire mortgage need to be paid in full when the decedent dies? Can the heirs take over the mortgage payments with the lender? Will the bank foreclose? Does the mortgage just go away?  (Nay, sweet summer child).

All good questions. 

The Garn-St. Germain Act is a federal law that protects heirs from lenders triggering the “due on sale” clause on residential mortgages. This act was passed in the 1980s and allows beneficiaries to assume the mortgage payments without having to pay off the entire balance immediately. The law is intended to protect surviving spouses, children, relatives (including grandchildren, stepchildren, or nieces/nephews in many cases) and trusts that inherit real property from having to pay off the mortgage right away. The heirs can step into the shoes of the deceased borrower and pay the mortgage payments monthly (business as usual).

As a side note, the Garn-St. Germain Act is how we’re able to transfer real property with a mortgage into a grantor revocable trust without having an issue with the lender (move along, nothin’ to see here). 

So, there you have it. We learn that in the UK, even with the new legislation, the House of Lord members aren’t elected. Most get appointed by the prime minister and serve for life. While other seats are reserved for Church of England bishops. None are elected. We also learn that here in the US, you can inherit someone’s mortgage payments along with inheriting their real property. Some legacies, it seemeth, are truly eternal.