Q: My Mom just passed away. She had no will and no one else on her mortgage. What happens to her mortgage?
The mortgage company is saying they can make me a successor of interest (her daughter). What is that and can I sell her house in the future? She had no debt except the mortgage and some back income tax. I have tried to get information from the IRS about her tax bill, but no one will help me. I am trying to do the right thing, but she had no life insurance left after her funeral expenses to pay off her house or to continue to pay the IRS. She had no will and I need to know what I can do.
If the mortgage is not paid, the mortgage company will simply foreclose on the property, sell it, and apply the proceeds to the unpaid mortgage amount. If there is a deficiency, it will submit a claim to the personal representative of your mother's estate when it is probated. If there is a surplus, it will pay the surplus to the personal representative of your mother's estate when it is probated.
You indicate that your mother owed back taxes but you are unsure of the amount. If the IRS has filed a tax lien against your mother, the amount will be stated in the lien documents recorded in the deed records. But the IRS does not always record a tax lien against a taxpayer's property.
If the IRS did not record a tax lien against the property, then the IRS may submit a claim to the personal representative of your mother's estate when it is probated. If there is a surplus from the foreclosure sale mentioned above, the IRS will have a claim against that money before any amount is distributed to you or your mother's other heirs.
I would not accept the mortgage company's invitation to become a "successor-in-interest" without a thorough understanding of what it means by that term. Unless you are already on the mortgage, you are not personally liable to pay the mortgage, and you should not sign any paperwork with the mortgage company that might create a personal obligation on your part to repay your mother's mortgage. Let the probate process address these issues.
Even if you were to hire an attorney and apply to be the administratrix of your mother's estate, you would not become personally liable to pay the mortgage but would only have to apply any money your mother's estate may have (including any surplus from a foreclosure sale) as required by law and by the probate court to pay her lawful creditors. If there is no money, or not enough money, you won't have to pay out of your pocket.
The mortgage company would like you to assume, in writing, the liabilities of the mortgage. Don't do so unless you think it through carefully. Her estate could be squeezed by the IRS or the mortgage company, and there does not seem to be much cash.
When your mother died, all property (e.g., the house) and interests (e.g., the mortgage) in her name went into limbo. No one can speak for her interests until someone is granted Letters Testamentary (if there is a will) or Letters of Administration (if there is no will). The mortgage holder, the home's insurer, and the IRS will want someone to keep making payments. If you can do so, you would likely buy some time to figure out how to go forward. You may have to sell the house in order to clear up her debts.
To sell the house, you would need to open an estate in the probate court. I am very familiar with the paper work. Once you have the Letters of Administration, you could settle or assume her debts.
Feel free to call me.
Anthony M. Avery agrees with this answer
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