Sometimes we provide for gifts in our Will or other testamentary documents without thinking about the debt that is on the asset or what happens to it. This often comes up when someone wants to gift real estate to others, since real property tends to be purchased through financing.

Generally, we look to the express provisions of a deceased person's Will or Trust to determine his or her intent with respect to gifts that are made. California Probate Code Section 21102 provides as follows:

(a) The intention of the transferor as expressed in the instrument controls the legal effect of the dispositions made in the instrument.

(b) The rules of construction in this part apply where the intention of the transferor is not indicated by the instrument.

(c) Nothing in this section limits the use of extrinsic evidence, to the extent otherwise authorized by law, to determine the intention of the transferor.

In addition, where property is subject to a mortgage or debt, a specific gift of that property will be transferred and remain subject to that mortgage and debt, as provided in California Probate Code Section 21131, which states:

A specific gift passes the property transferred subject to any mortgage, deed of trust, or other lien existing at the date of death, without right of exoneration, regardless of a general directive to pay debts contained in the instrument.

To avoid this outcome, it is important for you to specify whether the debt on the property is to be paid off prior to the transfer, i.e., should the debt be "exonerated". Moreover, if your estate is not large enough to fully exonerate the debt, you may also need to think about which of your other gifts can be cut back and in what sequence they should abate.