[tattoued]

My mother passed away in September 2013. She had a home with a mortgage, no medical bills, TONS of "stuff" (I would have to call it hoarding), 2 credit card bills (one very small, one about $1700).

I have a brother and there was a will. She willed everything to us to split evenly. I am the executrix. I'm at the "accounting and inventory" point and want to be sure I have accounted for everything properly. I know I don't have to itemize everything, and there was a yard sale to get rid of whatever had some kind of value, she had some very nice valuable jewelry which I have in my possession. I had to pay the mortgage and utilities for a few months until we found a renter. We tried to sell it briefly, but this is not the market for trying to sell a house. There were also a few repair bills for the house to get it in shape (for either selling or renting), painting the entire inside, cleaning the entire inside, which was a task since she was a heavy smoker, and then there's the time that my brother and I spent going through the house and throwing away things, putting other important things aside, etc. I was told and I had read that our time can be compensated by the estate at a reasonable hourly rate of labor. According to accounting, there's more that went out than what the estate is worth. There was a car that was totalled during a test drive, which the insurance paid out on. I have included that as an asset. The house has a mortgage, so it doesn't really count, right? I'm sorry, I'm not selling the house to pay an unsecured debt in MY mind. There was a tax return, which I also have listed as an asset, and then all the other bills I mentioned earlier. I would think that my brother and I get compensated for the money we spent for cremation and labor, and the repairs and painting have already been paid from the revenue generated from the yard sale. After that, there is nothing left to pay the two credit card bills. I understand that if they wanted to, they can sue me for not paying the bill since I am a LEGAL representative of the estate. From my understanding, UNSECURED debt such as credit cards get paid LAST. Secured debt, medical bills, utilities (although not specified as utilities from what I'm reading) and repairs for the house get paid before credit cards. Am I right? So how do I handle these two outstanding debts that the estate cannot afford to pay? Am I expected to sell off some of my mother's jewelry (which doesn't go for a whole lot when you try to sell used jewelry, even though replacement value is considerable) to pay these bills? I know it doesn't have to come out of MY pocket, but I am also responsible for properly accounting everything in the estate and want to be sure I'm doing it correctly so I can close out my mother's estate without any hitches.

Appreciate any advice! Thank you!

[joypulv]

Can you explain why you don't want to sell the house to pay debts? Spring is always the best time to list a house. How does your brother feel about the house? How much is the mortgage balance? Is there life insurance on the loan, and you are perhaps making payments needlessly? Many questions. There are books on how to be an executor. Or you could pay a lawyer, although I understand that there isn't money to pay one - unless there is value in the house. That is a key question.

[AK lawyer]

There is equity in the house, correct?

If so, you are mistaken in your belief that you can simply not pay the credit card bills. No; they don't get paid last. They are entitled to be paid from the equity.

Spending estate money, and incurring labor costs for the purpose of fixing up the house, which I assume you and your brother intend to keep, is something to which the credit card creditors can properly object. You should have paid off these debts from the yard sale revenue.

[AK lawyer]

Also, you need to get probate court approval before you can pay yourself and your brother for the work the two of you have done.

And do you plan to keep the jewelry instead of paying the credit card debt? It doesn't work that way. Even if you only get two bucks for all of it, the creditors get paid before anything is distributed to the heirs.

[stinawords]

When someone dies all of their debts get paid first. (this includes selling assets if needed to cover debts) Then, if there is anything left over heirs split what's left according to the will. The work on the house even has to wait to be done until debts are paid. I realize you can't undo the work on it but now you need to make up for it however possible to get the rest her left over debt (no matter how much) paid. I don't know how much money any of her things are worth I'm not there to even estimate and I don't want you to try to itemize things for us. This is one reason that a lot of times, unless the children or other heirs are in the position to take over a mortgage or buy out what's left owed the house gets sold as well. I am not saying that you have to sell it but it is something to think about because the bank will want their money back as well as the credit card companies.

[AK lawyer]

... the bank will want their money back as well as the credit card companies.

The heirs who inherit the house, as I understand, may continue to make the mortgage payments, and as long as the mortgage remains current there won't be a problem. In other words, I don't believe a "due on sale" clause applies in the case of inheritance.

[tattoued]

Can you explain why you don't want to sell the house to pay debts? Spring is always the best time to list a house. How does your brother feel about the house? How much is the mortgage balance? Is there life insurance on the loan, and you are perhaps making payments needlessly? Many questions. There are books on how to be an executor. Or you could pay a lawyer, although I understand that there isn't money to pay one - unless there is value in the house. That is a key question.

The debt is $1700. Seems ludicrous to sell a house for a debt that small, although as it stands now, the estate does not have the funds to pay this debt. No, there is no mortgage insurance. The house was up for sale for a brief time, with not even so much as a nibble. To avoid having to continue to pay the mortgage month after month out of my own pocket until it sold, I opted to rent the house for the time being, until the real estate market improves. Intel laid off about 400 workers in Rio Rancho, where the house is, and real estate is NOT moving presently.

[tattoued]

When someone dies all of their debts get paid first. (this includes selling assets if needed to cover debts) Then, if there is anything left over heirs split what's left according to the will. The work on the house even has to wait to be done until debts are paid. I realize you can't undo the work on it but now you need to make up for it however possible to get the rest her left over debt (no matter how much) paid. I don't know how much money any of her things are worth I'm not there to even estimate and I don't want you to try to itemize things for us. This is one reason that a lot of times, unless the children or other heirs are in the position to take over a mortgage or buy out what's left owed the house gets sold as well. I am not saying that you have to sell it but it is something to think about because the bank will want their money back as well as the credit card companies.

Here is a list - in order of priority - that I received directly from the probate court of Sandoval County in NM:

First: Costs and expenses of administration of the estate
Second: Reasonable funeral expenses of the decedent
Third: Debts and taxes with preference under federal law (NOT credit cards)
Fourth: Reasonable medical and hospital expenses of the last illness of the decedent
Fifth: Debts and taxes with preference under other laws of New Mexico (NOT credit cards)
Sixth: All other claims (THIS is credit cards)

Where does unsecured credit debt fall? It's not a debt with preference like a mortgage, personal or secured loan, so that puts it SIXTH, no?

Also said in NM probate info: "If payment of higher priority claims exhausts all probate estate assets, creditors with lower priority (unsecured debt) for payment receive nothing."

I'm going to try to settle with them if possible, by selling some of the jewelry. Even though replacement value is fairly high, market resale value is very low when it comes to jewelry. I've been researching that aspect.

[ScottGem]

While, you are correct that credit card debt falls at the bottom, Heirs fall even lower. This means you can't transfer the house into your names until the creditors are paid. Which also means you can't close the estate until all the assets are transferred. If you can't sell off assets to pay the debts, then you have to advance the funds to do so if you want to close the estate.

[AK lawyer]

...
Also said in NM probate info: "If payment of higher priority claims exhausts all probate estate assets, creditors with lower priority (unsecured debt) for payment receive nothing."...

(emphasis added).

You do see that situation doesn't apply? All probate estate assests are not exhausted; you still have the house, the jewelry, the tax refund, etc. And, as I previously noted, you should have used the yard sale proceeds to pay down the credit card debt.

[ScottGem]

The repairs and painting of the house could be considered costs of administration so could be paid from the proceeds of the yard sale before paying the credit cards.

You say the house has a mortgage so it doesn't count. Not sure what that means. The equity in the house (is there any equity?) is an asset to the estate and therefore, as AK points out, the estate assets have not been exhausted.

As I see it you have 2 choices. You can either leave the estate open, (in which case, interest will continue to accrue on the credit card debt) until you can sell the house and have enough to pay off the debt, after you take off what you advanced to pay expenses. Or you pay off the credit card debt, transfer the house into you and your brother's name, close the estate and then continue to rent the house until you get a buyer.

[tattoued]

As I mentioned before, I just see no sense in selling the house to pay a $1700 credit card debt. I tried to sell it for as long as I could afford to pay the mortgage out of my own pocket, which wasn't very long. Renting was the only option. I would like to pay off the credit card debt. Just trying to figure out where that is going to come from since I know I don't have to pay it from my own pocket - or do I? The only other option is to see if I can sell the jewelry my mother left us to cover that debt. We can't transfer the house into our names from my understanding since there is a mortgage on the home, correct? Or is that something different when you're talking about a deed?

[tattoued]

(emphasis added).

You do see that situation doesn't apply? All probate estate assests are not exhausted; you still have the house, the jewelry, the tax refund, etc. And, as I previously noted, you should have used the yard sale proceeds to pay down the credit card debt.

The tax refund was used to reimburse me for mortgage, utilities, maintenance, funeral expenses, probate admin expenses, etc. that was taken out of my pocket. Companies that maintain and repair homes do not do this work on credit and need to be paid immediately, so don't they take precedence over credit card debt?

[ScottGem]

Yes I agree it make little or no sense to sell just to pay off that debt. But you can't close the estate until all debts are paid OR the assets are exhausted. So you have the 2 options that I explained. You can advance any funds to the estate which will be refunded to you when disburse it.

Your understanding is incorrect about the mortgage. As an heir you can transfer the property into your names and assume the mortgage. Since the mortgage is secured by the property, it goes with the property. However, you can't do that until all other debts are paid, because doing so amounts to a distribution of the estate. You can't do that until all other obligations are paid.

[tattoued]

Yes I agree it make little or no sense to sell just to pay off that debt. But you can't close the estate until all debts are paid OR the assets are exhausted. So you have the 2 options that I explained. You can advance any funds to the estate which will be refunded to you when disburse it.

Your understanding is incorrect about the mortgage. As an heir you can transfer the property into your names and assume the mortgage. Since the mortgage is secured by the property, it goes with the property. However, you can't do that until all other debts are paid, because doing so amounts to a distribution of the estate. You can't do that until all other obligations are paid.

I was told that to assume the mortgage, we have to qualify for the loan. Neither one of us can qualify for the loan (which is why we opted to rent it out for awhile until the market picks up a bit to be able to even sell it. We have no way to pay the mortgage in the meantime, though, while the house is up for sale - rock and a hard place). I'm overextended, and my brother has no credit. I'm not sure I understand what you're saying by "you can advance any funds to the estate which will be refunded to you when you disburse it." I have no funds to advance. You mean selling the jewelry and whatever else there may be (which there is nothing else) to pay? There would be no "refund". There's nothing there to refund. (unless I'm misunderstanding you) It's hard enough losing your mom, then you have to give up things that she bequeathed to you to pay a credit card. Ugh. I would have hired an attorney but I couldn't afford it.

[stinawords]

Renting the house was not the only option when it didn't sell. You could have let the bank take it back and foreclose on it. Granted that would not have allowed you to be able to keep it but then you wouldn't have spent money on mortgage payments and the credit cards would have already been paid off. Then entire estate could have been closed already. I realize that you want to keep the house. That is still possible as has been said, the credit cards have to be paid though and as long as the estate stays open they are accruing interest and more is owed. Since you paid yourself back, why not just fork over the money to pay the credit card debt (out of your pocket) then proceed with transferring the house. That way the estate can be closed and the house can be transferred to you and your brother.

I had made my comment about the bank wanting their money as well not because op has to pay it all right now with the sale of the house but because it is true. In my experience when parents leave houses to children (or other heirs) most of the time they are already paid off. This is obviously not always the case. When there is a mortgage left it still needs to be paid whether by what is left in the estate before it transfers (didn't happen in this case) or after the heirs take it over. Generally, it all works out but I have had a couple cases when I was first out of college that the house was being transferred with mortgage but the son (in both cases there were sons left one with a spouse and one without) could not afford it. They both ended up in foreclosure because they did not have the resources to pay the mortgage. In one case the house was foreclosed upon before transfer so son got out free of tarnish. The other, however, the son and his wife then had a foreclosure on their credit. Now, why did I bring this up? Because, if a $1,700 credit card bill is causing this many problems, how is a mortgage, much larger, going to be taken care of? Yes, renting will help I have known landlords that have had multiple months in between renters so that means no income on that property. Not saying that will be the case here just something to keep in mind.

[stinawords]

It is true that to take over the mortgage you will need to qualify for it through the bank. This is because, the bank wants to make sure they get their money back. I was already typing when you posted your last response. Now, I understand why you don't pay the credit card out of your pockets in order to move forward.

I am sorry for your loss. No one looks forward to being in that position. That being said, it is also true that you get nothing until all debts are paid. Any and all resources of the estate have to be used in order to settle the persons remaining debt. Then, if there is anything left the heirs each get their share. No one inherits anything until all debts are paid. I'm not trying to be too harsh but I'm not going to sugar coat it either.

[tattoued]

Renting the house was not the only option when it didn't sell. You could have let the bank take it back and foreclose on it. Granted that would not have allowed you to be able to keep it but then you wouldn't have spent money on mortgage payments and the credit cards would have already been paid off. Then entire estate could have been closed already. I realize that you want to keep the house. That is still possible as has been said, the credit cards have to be paid though and as long as the estate stays open they are accruing interest and more is owed. Since you paid yourself back, why not just fork over the money to pay the credit card debt (out of your pocket) then proceed with transferring the house. That way the estate can be closed and the house can be transferred to you and your brother.

I had made my comment about the bank wanting their money as well not because op has to pay it all right now with the sale of the house but because it is true. In my experience when parents leave houses to children (or other heirs) most of the time they are already paid off. This is obviously not always the case. When there is a mortgage left it still needs to be paid whether by what is left in the estate before it transfers (didn't happen in this case) or after the heirs take it over. Generally, it all works out but I have had a couple cases when I was first out of college that the house was being transferred with mortgage but the son (in both cases there were sons left one with a spouse and one without) could not afford it. They both ended up in foreclosure because they did not have the resources to pay the mortgage. In one case the house was foreclosed upon before transfer so son got out free of tarnish. The other, however, the son and his wife then had a foreclosure on their credit. Now, why did I bring this up? Because, if a $1,700 credit card bill is causing this many problems, how is a mortgage, much larger, going to be taken care of? Yes, renting will help I have known landlords that have had multiple months in between renters so that means no income on that property. Not saying that will be the case here just something to keep in mind.

To my brother and me, foreclosure was not an option. We felt that renting it out for awhile to at least keep up with the mortgage was the best bet, until the real estate market hopefully leveled out enough to at least get a reasonable offer on the house and sell it. I'm hoping if I contact the credit card company again and let them know the situation, they'll accept some kind of offer that may not be the entire amount owed, but something satisfactory to both parties. I know credit card companies will settle on a mutually agreeable amount instead of bankruptcy or other similar situations. I figure it doesn't hurt to at least reach out to them and at least ask the question. I feel grateful, though, that it's just the ONE credit card. It could have been so much worse! Once I settle with them, then I assume we can have the deed transferred into our names, even though the mortgage will still be in my mother's name? According to the conversation I had with mortgage company, they didn't care as long as the mortgage was being paid.

The money I paid myself back for mortgage and other expenses has already been paid back to MY credit card company, so I am not in possession of that money any longer. I guess I'd have to rob Peter to pay Paul?

[joypulv]

This seems complicated for $1700. Probate can remain open as long as the court is willing, while you work out a payment plan without interest on the c.c. debt. C.c. companies aren't nearly as willing to negotiate down as they were 10 years ago.

On a bitter winter day my c.c. was denied at the grocery store because I had made a large phone order miles away, and it triggered a flag for distance. I was furious. When I talked to the c.c. company, they wanted a hold on my card for 30 days while I filled out paperwork. I got even more angry. I ended up with my card reinstated and a $30 credit for my grief. Try for $30/mo for 2 years with a balloon payment at the end. Insist. (You do realize that you can't just say 'I want the jewelry' and 'we don't want to lose the house' and not pay off her c.c. )

[tattoued]

This seems complicated for $1700. Probate can remain open as long as the court is willing, while you work out a payment plan without interest on the c.c. debt. C.c. companies aren't nearly as willing to negotiate down as they were 10 years ago.

On a bitter winter day my c.c. was denied at the grocery store because I had made a large phone order miles away, and it triggered a flag for distance. I was furious. When I talked to the c.c. company, they wanted a hold on my card for 30 days while I filled out paperwork. I got even more angry. I ended up with my card reinstated and a $30 credit for my grief. Try for $30/mo for 2 years with a balloon payment at the end. Insist. (You do realize that you can't just say 'I want the jewelry' and 'we don't want to lose the house' and not pay off her c.c. )

Yes, I do understand that. I just didn't think the jewelry was considered up for grabs to pay a credit card since it was bequeathed. Because there was no "liquid" assets, I mistakenly thought the estate monies were exhausted since the credit cards are paid last, before heirs. I already understand at this point that we get nothing but photographs and a few sentimental trinkets of little or no value to anyone else except us. Sad. I was thinking that NM's property allowance of $15,000 included the jewelry. I'm going to check into that a bit farther, I think. We will definitely keep the house for the time being. I will find another way to pay the credit card debt.