As life insurance beneficiaries, how should we pay off my dad's mortgage?
Question Details: My dad passed away and myself and my two siblings are the beneficiaries of his life insurance. We each have a separate retained asset account with about $90,000 in it. We are wanting to pay off the house, which has $140,000 left to be paid. We each want to pay an equal amount. The mortgage was in my Dad's name only, but the house itself was in his name as well as my mom's. If we pay off the mortgage, what will happen financially? I went to the bank with the intention of each of us writing a check to receive a certified check for the entire amount, and he said not to do that. He said that my mom can end up with tax problems if that happens. So how should we handle it? She is reluctant to get a tax advisor that is why I'm asking here first.
There are many issues that need to be considered carefully before you do anything. If your mother is still alive, the house will pass automatically to her outside of the will and outside of probate. Additionally, the life insurance proceeds you receive are also consider property that passes outside of probate and are not responsible for the payment of any debts.
However, the mortgage will attach to the property and pass to whomever inherits it, namely your mother. It may turn out that the person who receives the house or the residuary of the estate would be responsible for the payment of the house mortgage, depending on the terms of the will.
You should speak with an experienced estate and probate attorney before paying any bills or probating any property.
Brad Micklin, Esq.
187 Washington Ave.
Nutley, NJ
973-562-0100
