Unexpected Inheritance of Property-HELP

[alice1967]

Hello, I'm asking a question on behalf of a friend who's too upset right now to think about this question. I'll call her Rose. A few years ago, a good friend of Rose's and an acquaintance of mine, Marsha, drew up her will as a formality. She was only 53 at the time and expected to go on living and being a professor for many years. As she was unmarried with no children, she left her home and most of its contents to Rose. I believe the intention was for the house to go Rose's children, who are right now only 3 and 6. Quite tragically, Marsha died in an auto accident last week. Rose is devastated and consumed with taking care of the arrangements for services. My question is, what's going to happen to her regarding the property she now owns? Her children obviously don't need their own house yet, and Rose and her husband cannot afford two mortgages. I know they like their house and would probably not want to sell it to move into Marsha's, which is in a different zip code with many professors are probably more expensive. Are they going to have to may the mortgage on the house until it sells? is there a way the bank that held Marsha's mortgage can take it back? What will this do to their credit? I'm looking for some preliminary answers for Rose to help her feel a little less overwhelmed when she has to tackle this next hurdle.

 

[ShyCat]

What state?

 

[alice1967]

Pennsylvania.

 

[OHRoadwarrior]

If there is equity in the home and she is the only one named to inherit everything, she should open probate and be appointed executor of the estate. Use M's bank acct and liquidated assets to pay mortgage until she can sell the house and reap the equity. If she was only given the house and there is little or no equity, decline the bequest and allow the bank to foreclose. As long as she does not sign to accept the home or responsibility for it, she will be liability free. The executor might want to redeem the home she declines and use estate assets to pay for and sell the house for other heirs. She should cooperate with paperwork declining the bequest so the executor can do so, out of respect for M's memory.

 

[LdiJ]

If there is equity in the home and she is the only one named to inherit everything, she should open probate and be appointed executor of the estate. Use M's bank acct and liquidated assets to pay mortgage until she can sell the house and reap the equity. If she was only given the house and there is little or no equity, decline the bequest and allow the bank to foreclose. As long as she does not sign to accept the home or responsibility for it, she will be liability free. The executor might want to redeem the home she declines and use estate assets to pay for and sell the house for other heirs. She should cooperate with paperwork declining the bequest so the executor can do so, out of respect for M's memory.

I agree with this response but will expand a little bit more.

Rose should not freak out about the mortgage if there is equity in the house. Yes, it might take some finagling to make sure that the mortgage is paid until the home is sold, but there is no reason to throw away equity. Even if M intended for the house to go to Rose's children, there is no reason why Rose cannot put the sales proceeds from the home into accounts for her children.

The bank is not going to immediately foreclose if a single mortgage payment get missed, so she has some time to figure out what she is doing.

 

[alice1967]

Thank you both for your help. I mentioned these options to Rose and her husband and she said she did want to be in charge of the will, as there are several of pieces of art and artifacts she wants to be sure are dealt with properly. Hopefully the sale of some of the pieces in Marsha's estate will cover the price of the mortgage for five or six months at least, and I doubt myself a house would sit empty in that neighborhood for long, especially priced at or slightly below market. Nice homes within walking distance to the university are more in-demand than I thought (three people have already inquired about Marsha's home). Any money leftover from the estate and home sale will go into a trust for her children. Rose did not say this is what she was going to do but I felt she was leaning this way last we talked. Thanks again so much for your help, it's so wonderful to be to just focus on Marsha's services without the question of where to go next looming over our heads.

 

[anteater]

Tell Rose:

1) Don't forget about the PA Inheritance Tax. The rate is going to be 15% for assets going to her.

2) Don't dawdle in opening probate. Payment of the the Inheritance Tax (even if an estimate) earns a 5% discount if made within 3 months of the date of death.