My mother in law passed, owes 63,000 on her home still. Can we give back to bank without penaty?

You can give the home back to the bank if the bank agrees to a short sale. This is where the bank receives less in sales proceeds than is owed on the mortgage. The bank then has the right to collect the deficiency.

The bank has to take you to court to do this, but if you don't have the assets or few assets to cover the balance owed, the bank won't go to the trouble, as it is an expensive process for them. If the home is still in your mother-in-law's name, and there are no other assets of value in the estate, you can let the bank take the home. The bank will turn to the estate to pay the difference.

But, if there is not enough in the estate to pay the difference, the bank will just sell the home and get what it can for it. There is no penalty on your part, and no credit impact. It is all part of your mother-in-law's estate.

However, if your name is on the mortgage, or she left the home to you and it is not titled in your name, then you have full responsibility for the mortgage balance.

Thanks for the information. The mortgage is just in her name. She has a revolkable trust, the mortgage was not included in that, so we think we might have to go to probate on the house if we cannot put the house into the trust?

I don't know what that means to being able to give it back to the bank? What if the trust has listed the two sons that are alive as in control of her estate? Does that make them responsible for the balance of the mortgage eventhough they are not listed on mortgage quickiekoala 4 months ago .

She had a revocable trust. Did the trust become irrevocable on the date of her death? The house does not have to go into the trust.

The purpose of a trust is to keep property and money out of the estate for estate tax purposes. That property has to be in an irrevocable trust three years prior to death to keep in out of the estate. Unless her estate was worth over $5,000,000, there is no estate tax.

Just because the two sons are listed as trustees, does not make them personally responsible for the debt. The estate is responsible for the debt. Your name is not on the mortgage.

You have no responsibility. What the estate needs to do is sell the house and then pay off as much of the mortgage as possible. If there is not enough money left after the house is sold, the bank just takes what it can get and that is the end of that.

Or you can explain to the bank the situation and ask them if they want to sell the house and they can keep what they can get. Just be aware that all debts of the estate have to be settled before money is distributed to heirs. I would contact the attorney that drew up you mother-in-laws trust and as him for advice, or contact the probate court in your state and ask for help.

The estate is less than that. I thank you for your help in this matter. Question can the bank get into the revocable trust to get the money to pay off the mortgage eventhough there is no where near that much money in the trust?

Quickiekoala 4 months ago .

The bank won't try to get into the trust. The trustee will notify the bank that there is no money to pay the mortgage. The bank will ask that the home be sold.

If the selling price does not cover the mortgage, the trustee will then have to use whatever money is left in the trust to pay the balance. If it still not enough, then the bank is out of luck. Remember all debts of the estate must be paid before money is distributed to the heirs.

Thanks for your help in this matter. Quickiekoala 4 months ago .

Not sure going to get an apprasal on on it. She bought it for lik 95,000 about 9-10 years ago. Quickiekoala 4 months ago .

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