Q: I have inherited a property from a relative who was still paying off the mortgage. What is my liability?

A: Your debts don’t die with you. They survive you and have to be paid from your estate.

The default position in most Australian states is that the mortgaged property will be liable for the payment of the outstanding debt but money from the general pool of assets in an estate will not automatically assist to pay out a mortgaged property.

The Supreme Court of New South Wales looked at the issue in a recent case, Winn v Harding. In this case, the deceased had included a specific intention in her will that payment of the mortgage debt would be from her residual estate, meaning everything that she owned except the property itself.

The deceased’s residual estate did not have enough funds to cover the payment of the remaining debt.

In light of this, the court decided that the property was liable for payment of the remaining mortgage debt, essentially reverting back to the default position.

Olivia Agosti is a solicitor at Townsends Business & Corporate Lawyers.