The executor is the person that a testator, or will maker, names in his will to manage the distribution of his estate when he dies. When someone dies leaving an unpaid mortgage, the executor of the will assumes responsibility for paying the mortgage from the assets of the estate while she is overseeing the estate’s distribution.
If you become an executor, you have to wrap up the deceased's affairs. This typically occurs during probate, which is a court-supervised process during which you find and value the deceased's assets, pay his debts, collect debts owed to him -- and ultimately distribute his remaining assets to his beneficiaries and heirs once his debts are paid. If his estate includes a house, it's your responsibility to pay the utilities, insurance, taxes and mortgage until the beneficiaries take title. You do this by setting up a bank account for the estate, putting the deceased's money into it, and using the account to pay the bills. If you need the assistance of a lawyer, accountant, appraiser or other professional while managing the estate, you can pay for their services from the estate's account.
Not everyone dies with enough money in the bank to settle debts owed. If the estate has more bills piling up than money to pay them, as executor, you have the power -- and often the obligation -- to sell the deceased's assets to pay the creditors. If the assets still aren't enough, the creditors go unpaid. A mortgage is different because it's secured by a lien on the house. If there's not enough money to keep up the mortgage, the bank can foreclose on the house.
As an executor, you're bound by fiduciary duty. This means that your decisions and actions must be in the best interests of the beneficiaries, not yourself. Selling the house to yourself for half of what it's worth would violate your fiduciary duty -- as would simple incompetence, such as enabling the bank to foreclose because you never sent in a mortgage payment. If you breach your duty to the beneficiaries, it's possible that they can sue you for damages.
There may be a point during probate where it's easier to write the mortgage lender a check out of your own account than pay yourself back from the estate funds. Don't. Commingling your money with the estate funds is strictly banned, even if it makes practical sense. A probate judge will see it as a sign of potential fraud. Even if your motives are good, the judge may remove you as executor -- and you might face legal penalties as well.
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- Henrico Commissioner of Accounts: Duties of the Administrator or Executor
- Unruh, Turner, Burke & Frees: Executor Responsibilities Lawsuit
- Richard A. Whitney: Guidelines for Executors and Administrators of Decedents' Estates
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