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Paying off mortgage debt

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markmalone

Junior Member
What is the name of your state? Alaska.
Q: Can estate cash be used to pay off real estate or does the house need to pay for itself? The house, with a mortgage, has been left to the two youngest of 5 kids. All five kids share equally in the residuary estate consisting of personal property, including a checking account that has more than enough money to pay off the mortgage.
 


nextwife

Senior Member
Were there any instructions i n the will? Normally, the asset itself with whatever equity is what is passed by the estate. The real estate is not normally paid off by the estate, unless instructed to do so. Also, of course, any creditors must be paid.

If the estate was left to all five, but the real estate to only two, it would unfairly dissipate the estate to the detriment of the three other siblings if the estate were drained to payoff the mortgage. The estate is NOT obligated to make the real estate free and clear unless there is specific language instructing this.
 

Dandy Don

Senior Member
Creditors should be paid first, but the executor needs to consult with the heirs to see if they want to pay off the mortgage. How much is the outstanding mortage due, and how much equity do the heirs have in the home (how much in mortgage payments have already been made)? If they want to pay off the home, then fine. But they may alternatively want to move somewhere else and let the mortgage company sell the home, or if the heirs have enough equity they may agree to let the home be sold and split the profits if any.
 

nextwife

Senior Member
Q: Can estate cash be used to pay off real estate or does the house need to pay for itself? The house, with a mortgage, has been left to the two youngest of 5 kids. All five kids share equally in the residuary estate .
Creditors should be paid first, but the executor needs to consult with the heirs to see if they want to pay off the mortgage. How much is the outstanding mortage due, and how much equity do the heirs have in the home (how much in mortgage payments have already been made)? If they want to pay off the home, then fine. But they may alternatively want to move somewhere else and let the mortgage company sell the home, or if the heirs have enough equity they may agree to let the home be sold and split the profits if any.
Dandy Don, only two of the five heirs inherited the house. The remaining estate was left to the five heirs equally. While the three non-RE owning heirs may be willing to give away most or all of their inheritance so that their younger siblings can get a free and clear house, they are not obligated to do so. If the estate pays off the mortgage, it will be reducing the estate portion that the three siblings who are not inheriting the house get.

And if the house is eventually sold, only the two younger sibs who are inheriting it would have a right to the sales proceeds.
 
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