Dear Liz: Our dad is 93 and has a reverse mortgage on his house, where he lived until recently with my brother and my brother’s friend. In August, we had to move Dad into assisted living. Shortly after that, the “friend” locked my brother out of the house and has been a squatter ever since.
We hired an attorney, and the case was reviewed by judges near the end of last year, but we still don’t know the outcome. Hopefully, we will get him out, but the house has so many costly repairs required, even before the squatter, that we don’t think we would clear enough from selling it to pay what is owed to the bank. Probably the most that we could get for the contents is $5,000 to $10,000.
The question is: once the house is gone, are there many fees we will need to pay to settle our dad’s estate? He has named my brother and me as co-executors. Since we both still work full-time, is there a way to avoid being the executor? What happens if there is no executor named?
Answer: What a nightmare. If it helps, take comfort in knowing that you won’t be on the hook if the house doesn’t sell for enough to pay off the loan. That’s part of the deal with a reverse mortgage. If there’s equity left over, the borrower (or their heirs) can keep it. But if the debt exceeds the sale proceeds, that’s the lender’s problem.
In fact, you may not have to deal with a sale at all. Once you get rid of the squatter, your dad can sign over the deed to the lender (a recourse known as “deed in lieu of foreclosure”) rather than go through the hassle of selling the property. Discuss the situation with your attorney — who should be keeping you updated about the status of the eviction, by the way — and contact the lender to find out its process for this option. The lender needs to be informed anyway since reverse mortgages come due when the borrower dies, sells or permanently moves out.
You also won’t be on the hook for settling the estate once your dad dies. That can be costly, but the expenses come out of the estate itself, not the heirs’ or executors’ pockets. If there isn’t enough left over to pay all the bills, there’s a legal process for prioritizing what gets paid and how much.
As mentioned in previous columns, no one can be forced to be an executor. The probate court can appoint someone to settle the estate if necessary. Serving this function, though, can be a way to honor our loved ones.