Execution of Wills

[VolunteerHillbilly]

@volwindy @VolunteerHillbilly


Here's how the land is:

My great aunt left my father her 66 acres with a house. Mom and dad built a retirement home behind the old house. So, that parcel has two houses. It will divided by house and land per equal value between my brother and sister. There are separate mail box numbers, and there is a mortgage on one house, but I noticed on the assessor's map, the acreage and address is still one for tax purposes.

My place (my dad's old house) was between him and his brother. When his brother died, dad surveyed out half the acreage to his kids, and my portion has the house and remaining acreage. Both listed independently in the assessors office.

Let's assume for now, everyone is in agreement. we are all getting the houses we wanted. two of us have been living in them. I did some more homework on tax maps and such. my house I think has been filed and subdivided on the deed, because dad had to give his brothers kids a portion of his fathers land. But, it is still in dads name.

Here's where I now have questions:
1. there is a good chunk of money in accounts to pay off the mortgage on the parents house going to my sister. By law does this have to be done. he made the comment to me there was nothing in the will that says we have to, like he wanted to keep his money (he's the executor). I think it has to be paid off legally, and should be because it's right, the other two houses have no liens, and it's how mom and dad raised us. Where it gets sketchy for me is if the mortgage is only on one of the two houses on that property, but it doesn't appear it has been divided as far as the assessors office, what does all that mean. ?? I'd like some money, but I still inherit a debt free place, so it's not a bad day.

2. there was no living trust, just a will, so I think I did find where in TN everything except the property can be divided now, and the land and houses go through probate anyway, or it's near impossible to transfer deed.

3. The above is what makes it tough for my sister. Probate is time and money, and if uncontested may not be too bad. But, it could still be months, and there will be mortgage payments on this house plus theirs and that puts a strain on them. Or the cash could be kept back to make house payments till probate is settled then pay mortgage off. Which means we have to watch my brother. He fell a little further from the tree and is acting a little sketchy. can't tell me and her the same things.....

4. As of now, no deed is in our names. Dad was a procrastinator and didn't do his homework and left everything in a will instead of a trust where you can skip probate.

Disclaimer: I'm just stating a couple of points about TN law based on what might occur in a situation similar to what you describe. This is a little outside my area of knowledge. I can't take on clients without losing my job but I can offer general statements about the law. People who foresee legal troubles need to find someone who can represent them.

If a will is silent on whether estate assets can be used to pay off a mortgage against real property that passes through the will, the person who inherits the mortgaged real estate can claim exoneration from the probate court to use estate other assets to pay off the property. If the will says that the mortgage is not to be paid off from other assets, the heir takes the property with the mortgage. I think that exoneration is treated the same as a creditor's claim and has to be claimed within 12 months of the death. Some states don't do this anymore but I am pretty sure that Tennessee still follows common law and allows courts to use exoneration.

I think title passes to the heirs for real property that is in the will when the executor files an affidavit of heirship (after the estate's debts are paid).

 

[GVF]

Disclaimer: I'm just stating a couple of points about TN law based on what might occur in a situation similar to what you describe. This is a little outside my area of knowledge. I can't take on clients without losing my job but I can offer general statements about the law. People who foresee legal troubles need to find someone who can represent them.

If a will is silent on whether estate assets can be used to pay off a mortgage against real property that passes through the will, the person who inherits the mortgaged real estate can claim exoneration from the probate court to use estate other assets to pay off the property. If the will says that the mortgage is not to be paid off from other assets, the heir takes the property with the mortgage. I think that exoneration is treated the same as a creditor's claim and has to be claimed within 12 months of the death. Some states don't do this anymore but I am pretty sure that Tennessee still follows common law and allows courts to use exoneration.

I think title passes to the heirs for real property that is in the will when the executor files an affidavit of heirship (after the estate's debts are paid).

That sounds like it could get tricky, but there's no other estate assets to speak of except the other two properties after the division. The only money is the balance of dad's life insurance that went to mom, and she turned around and put it in an account with all three named as beneficiaries to receive a third of that. There will be a moderate sum left in regular bank savings that I have no issue going toward the mortgage for my sister after probate is complete. we all agreed that money to stay intact until all expenses complete. My brother had done a good job having everything already settled like income tax filing and such, prior to moms unexpected passing. So, just normal business handlings for her, most everything is already took care of. Very little to do financially to wrap things up. and no creditors. Last payment on her car being made this week. Brother has worked 3 years to straighten everything out dad did when his mind checked out. All debts paid. Going into probate the only creditor left is the mortgage holder, and that is mom and dads local bank. The only exposure is if my sister goes nuts and sues the estate to force us all to take loans out on our houses to split their mortgage cost. Her husband seems amicable to just get the mortgage low enough he can handle it until they shed the mortgage they have in GA. Her third of the beneficiary account and what will possibly be left in savings would knock about 60K off the mortgage and get it well under 100.

 

[GVF]

I was the single heir on Tennessee property and took it through probate to insure clear title. I don't remember probate costing too much..

The plus is that the lawyer that did their will is now the probate judge, and a close church friend of theirs.

 

[GVF]

The banks don't care about the equity. They are concerned about the debt being paid off. If there is a will designating who gets the property, then that person can be named a successor in interest to the account to continue to pay the mortgage until the courts finalize the transfer of the deed and then the mortgage can be refinanced in their name. If nothing is done, then the bank will just foreclose. Unfortunately that's what a lot of children let happen because they don't have the money to pay for another mortgage.

What we are checking on is if the monthly payment is frozen until the probate process is complete. The mortgage is with mom and dads personal bank locally, albeit a large bank statewide. There is a respectable savings account to cover payments until re-titled, but it would go a lot further if the loan payments freeze temporarily.

 

[GVF]

Thanks. That's kind of what I meant. If an estate has just 2 assets, say a $100k home and a $100k bank account and the home has a $30k mortgage, if one heir is willed the house and a different heir is willed the cash, then the heir given the house is receiving $70k equity and the other gets $100k cash. The mortgage won't be paid off with the cash in the bank account unless the will explicitly states that it should be. Obviously if mortgage payments are missed then the bank will foreclose. Also, (I assume) until everything is settled then the $100k in the bank would continue to be used by the executor to make mortgage payments... so the heir getting the bank account receives less than $100k as payments are made.

That raises another question. If the bank account is set up with a TOD designation, does it transfer IMMEDIATELY upon the account owner's death and if so how are is the obligation for the mortgage payments handled? I guess it gets messy if there isn't unemcumbered cash available in the estate to meet the various ongoing obligations (including paying the attorney's and executor's fees while sorting out the potential mess).

Another question, more of a mortgage question, if an estate has a $100k bank account with a TOD beneficiary designated AND a $100k home that is upside down with a $125k mortgage, does the lender typically have a claim on the bank account or is the home itself the only asset that the lender can go after to pay off the mortgage?

I guess I could google the details of a TOD designation and find a lot of answers.

Our finding thus far by TN law is the only thing that is required to go to probate is real property, assuming that also means cars to be re-titled. All other accounts or TOD/named beneficiary accounts can transfer immediately.

we have also found that a living revocable trust serves the same functions as a will, but maybe better. If you do a revocable trust, it ends at the death of the trustor, just like a will. The major difference is that property under hte trust can go straight to the heir without probate. saves time and money. I will be looking at setting everything up in the trust instead of the will for our kids.

 

[GVF]

Pretty much. Even with a Will, if the knick knacks are said to be divided equally among the heirs, one heir could end up getting to it before another heir and lie about what actually was there. So if you want no issue, the will has to talk about every knick knacks, but who actually does that?

My parents actually asked my siblings and I what are the couple items we really want, so they have put that in the will, beyond that it's going to be a fight

That's a good point. There is a lot of family history in the houses. Old farm furniture hand made, painting from one of the artist uncles. the current oldest house is civil war construction. The artist uncle was Hungarian and married to my great aunt. they lived in NY at times, etc. mom was actively letting people call dibs for sometime now in preparation. there are items throughout the house that have names on sticky notes attached. And there are things we all agree go with each house regardless because of the history in that house. My grandfather also painted, and his paintings are in my house where he painted at, etc. It won't get ugly by any means unless my sister contests the mortgage. the other two properties are debt free. Efforts were made to divide equally on value. But, that was impossible. The mortgaged house's current equity alone is still more than my whole place paid off, even though I have 43 acres with mine. Dad did some really mid boggling things financially the last 15 years. Vast monies we have no clue where it went. 4 accounts that he divided his income between then thought he had no money. Massive plastic debt too, thinking he had no money. Yet his retirement income was near 13K a month net. They never had a need for credit cards or car payments and didn't even know it. We only needed one of them to live another 4 years for my brother to have everything paid out debt free. The house was the only thing left, and it would have started double payments next month. Debt is an anchor to everybody. The best plan you can leave your heirs, is a debt free plan. That's my lesson learned. My wife and I have been working toward that and have very little left to pay off except for the vehicle payment.

 

[GVF]

In summary, my lesson to pass on after doing a bunch of reading since mom passed is to seriously weigh a living trust verses a will. You accomplish the same with both, but a living revocable trust acts like a will at death, yet passes properties direct without having to use probate. It's cleaner for the heirs. I will be doing my homework on this as I set mine up to pass on to the two boys after me and wife go grazing in other pastures. If you have serious assets and wealth to protect, then the irrevocable trust is probably your thing, more complicated and restrictive, and probably more expensive to set up. and lives on past the death of the trustor.

 

[volwindy]

What we are checking on is if the monthly payment is frozen until the probate process is complete. The mortgage is with mom and dads personal bank locally, albeit a large bank statewide. There is a respectable savings account to cover payments until re-titled, but it would go a lot further if the loan payments freeze temporarily.

It really will depend on who services the loan on whether the mortgage company can offer anything or not. It's possible a forbearance agreement could happen.