Legal Question in Wills and Trusts in Virginia

Re: Real Estate in Probate

Well, first of all, your problem is based on an assumption that you state at the end. The proceeds will be held in escrow for a year? I've never heard of that. I assume that you have been officially appointed as executor, with the proper court orders? If so, your DUTY is to collect all of the assets of the estate, inventory them, determine all of your father's debts, and pay off all the debts. You can only distribute what is left after paying all of his debts. A mortgage on a house is a tricky situation, but it is basically just a debt like any other. (Make sure that there is nothing in the will that explicitly discusses how you must handle the mortgage.)

If you sell the house as executor, it is your responsibility to pay off the mortgage, as any other debt. In fact, it would be impossible to sell the house without paying off the mortgage in the process. So, by no means would you have to wait on year to pay off the mortgage.

The only reason why any assets of the estate might be held in escrow is to wait and see if people show up with debts that you don't know about. As executor, you should hold back enough money to pay any debts that might show up of which you are not aware. However, this does not mean failing to pay debts that you DO know about (such as the mortgage).

Of course you should announce in the newspaper a deadline by which anyone believing that your father owed them money must present their claim, or forever hold their peace. If you hold back a "reserve" to pay debts that show up late, this would only apply to the NET proceeds of the house, after paying off the mortgage. There should be absolutely no problem selling the house and paying off the mortgage.

However, I also have contacts who might be able to refinance the house for you and arrange lower mortgage payments. This is not only a question of interests rates, but also of mortgage types, such as interest-only loans, ARM's with interest rates frozen for 3 or 5 years, etc. So make sure you are not making an assumption that you cannot pay the mortgage, particularly if you are RENTING the house out as an investment.