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My mother passed away June 15th. Her home is in Michigan and…

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My mother passed away June...
My mother passed away June 15th. Her home is in Michigan and her mortgage balance is $80K. A realtor came to appraise the home and said with the comps in the neighborhood it would need to be listed for $41K. Since we owe more then we can get for it we are looking at walking away. The house is in the name of her Living Trust as are her retirement funds. Can we disburse the Trust money or are we responsible for paying what we have to the bank? Will the trustee / executor be responsible if the funds are disbursed and we walk away and let the house go into forclosure?
Submitted: 8 years ago.Category: Real Estate Law
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6/29/2010
Real Estate Lawyer: Law Educator, Esq., Lawyer replied 8 years ago
Law Educator, Esq.
Category: Real Estate Law
Satisfied Customers: 126,872
Experience: Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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The trust before making any distributions must pay all creditors of the estate and if you make any distributions before all debts are paid then the trustee/executor can be liable for the debts not paid personally. At this point you need to inform the mortgage company that the estate is insolvent and you are going to end up needing to go to probate court with a probate attorney to settle this trust even though it is a trust and if not you would have to pay off the debts from the estate.


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Customer reply replied 8 years ago

There are several bills that are outstanding, her cremation cost, her vehicle, a credit card and utilities. We had planned on paying off the truck with the Trust funds as well as her bills as they come in. It will reduce the amount in the trust but since that pays her bills we are ok, I assume.

If the estate is insolvent, is it possible the bank will want the remaining funds towards the debt before they take the house as well?

her money had been in an IRA and we moved it to the trust, was that a bad move?

Real Estate Lawyer: Law Educator, Esq., Lawyer replied 8 years ago
The bills that are considered necessary funeral and medical expenses can be paid first along with the other bills later. If the estate is insolvent all the bank ends up with is the trust. Moving the IRA to a trust instead of naming someone specific as a beneficiary was a bad move because of the debt. Had a specific beneficiary been named then the IRA would never have been a part of her estate/trust and the beneficiary would have been able to keep all of that money, but it is too late for that now. You need to go to a probate/estate attorney for them to deal with the mortgage lender or you can try to negotiate with the lender to try to get them to accept a deed in lieu of foreclosure which is where they take the house in full payment of the debt and release the debt and then you can distribute the estate as you see fit.
Law Educator, Esq.
Category: Real Estate Law
Satisfied Customers: 126,872
Experience: Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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Customer reply replied 8 years ago
Would payment of the truck be accepted as a expense of the trust? It is in her name and is a bill she owes. We would like to pay it off.
Real Estate Lawyer: Law Educator, Esq., Lawyer replied 8 years ago
Yes, but you also need to look at the priority of liens. If the mortgage came before the truck loan, then the mortgage would claim a priority to be paid first. This is why you need to get the estate lawyer to review the bills and documents.
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