Testator asks about payment of mortgage from residue of estate.
Full Question:
Answer:
As a general rule in Texas and other states, a bequest or devise of encumbered property ( that is property such as a residence that is "encumbered" by a mortgage that secures payment of a loan agreement) does not obligate the personal representative of the decedent's estate to pay the indebtedness secured by the mortgage upon the residence. Generally, therefore, the personal representative simply gives the devisee a personal representative's deed to the residence which remains subject to the mortgage indebtedness. The devisee then must make the mortgage payments when due or lose the property. If the testator (the maker of the will) doesn't check the optional paragraph in Article 15, directing the PR to pay all debts of the estate from the residuary estate, then the devisee of the residence will take the property subject to the mortgage. If, however, the maker of the will checks the optional paragraph, then the PR will be obligated to pay all debts of the estate including the mortgage indebtedness from the residuary estate.
BUT, the residuary estate may not be great enough to pay all the estate's debts, and requiring the mortgage indebtedness may require the PR to sell all the assets of the estate including the residence in order to pay of all the estate's indebtedness. That is why the "pay all debts from the residue of the estate" provision is an optional provision. It may require liquidation (that is SALE) of all the estate's assets. Generally, the optional provision directing the PR to pay all debts from the residue of the estate works only when the mortgage indebtedness is relatively small in relation to the total value of the estate.
