Legal Question in Real Estate Law in California

This is a question better posed to the Probate, Wills and Trust section of LawGuru, but i know enough to tell you that the loan remains in place. The new "owner" of the loan will be whomever the parent leaves it to in their will or trust.

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Your question doesn't make sense. If a parent is carrying a loan on a house, the parent does not own the house free and clear. I suggest you repost your question with more and clearer detail as to the situation, and we should be able to give you a better answer.

I don't practice probate law either, but here is a guess based on what I remember from law school:

First, the loan owned to the parent by one of the five children does not automatically cease to be owed when the parent/creditor dies. The right to payment passes to the estate. This is unless the will has a provision forgiving the loan, of course.

Clearly, the four siblings who are not borrowers on the loan (or whoever the heirs are!!) have a legal interest, and right, to have the loan repaid and proceeds distributed. Perhaps the will leaves the promissory note to one or some of the heirs; if not, it is a general asset of the estate that would be distributed to the heirs are a residual gift.

Next, without knowing the formality of the loan documentation, or whether there even is a will or trust, I cannot give very specific advice. When people die without a will (intestate) or trust, their property is divided according to formulas in the Probate Code.

All the family members should monitor the situation to make sure that the estate is properly administered, generally by appointment of an administrator or court confirmation of the named executor. The administrator, executor or the estate's attorney should verify whether a deed of trust has been recorded, the loan's status, that taxes are paid and the insurance is current, and the identity of the heris and any special provisions in a will or trust for disposition of the note (loan).

Another issue is whether the parent was single or married at the time of death, and if married, whether the (right to repayment of) the loan was community property.

I assume the right to repayment of the loan, and not the house itself, is what belongs to the estate.

It gets paid by the estate or the lender will foreclose.