Detailed Answer
When a person dies and their estate enters probate in Iowa, someone (the personal representative, sometimes called an executor or administrator) takes control of the decedent’s assets and pays valid debts and expenses from estate funds. Iowa’s probate rules and the personal representative’s duties are set out in Iowa Code chapter 633 (Iowa Code ch. 633).
Mortgage payments — basic rules
Mortgages are secured debts tied to the property. The key points are:
- The mortgage stays attached to the property. The lender retains the right to enforce the mortgage if payments stop.
- The personal representative should determine whether the estate has cash to continue mortgage payments. If the estate has sufficient assets, the representative may pay the mortgage from estate funds while administering the estate.
- If heirs inherit the house, they generally take it subject to the mortgage. If they keep the house, they must keep paying the mortgage or negotiate with the lender. If they do not want the property, they can decline it and the lender may sell or foreclose under its rights.
- If mortgage payments stop, the lender may begin a foreclosure or other enforcement action under Iowa law. The fact that the owner is deceased does not prevent the lender from pursuing its remedies for default.
Mortgage and estate priorities
In Iowa, the personal representative must pay valid debts of the estate from estate assets before distributing property to beneficiaries. That generally includes secured debts such as a mortgage if estate funds are available. The representative must follow the claims process and priority rules in the probate code while protecting estate value for creditors and beneficiaries (Iowa Code ch. 633).
Scenarios you might encounter
- If the estate has cash or liquid assets: The representative can pay the mortgage and keep utilities on to preserve the property while probate proceeds.
- If the estate has little or no cash and the house is the main asset: The representative may market and sell the house to pay the mortgage and other creditors, or the lender may foreclose if payments lapse.
- If the property passes immediately to a surviving joint owner or beneficiary by operation of law (joint tenancy, transfer-on-death, tenancy by entirety, etc.): That person takes the property but usually remains responsible for mortgage payments unless the lender agrees otherwise.
Utilities (electric, water, gas, trash, internet)
Utilities are contract-based services. Important practical points:
- Utility companies typically will cut service for nonpayment. If the property needs to be preserved or shown for sale, the personal representative should keep utilities on and pay them from estate funds if possible.
- Utilities may require a new account holder’s name, a copy of the death certificate, or a probate appointment paper to switch billing. The personal representative should contact each utility promptly and explain the situation.
- If no one maintains utilities, property can quickly deteriorate (frozen pipes, mold, security risks), which can reduce sale value and complicate administration.
Practical duties for the personal representative
- Locate the will (if any), obtain the death certificate, and apply for appointment as personal representative through the probate court.
- Inventory assets, including bank accounts, real property, and whether a mortgage exists.
- Notify the mortgage lender and ask for the lender’s account details, payoff amount, and any available options (forbearance, loan assumption, short sale procedures).
- Assess whether the estate has money to keep paying the mortgage and utilities. If it does, pay necessary expenses to preserve estate value.
- Publish or send notices to creditors as required by Iowa probate rules and follow the creditor claim process in Iowa Code chapter 633 (Iowa Code ch. 633).
- Keep careful records of payments from estate funds. Beneficiaries and the court will require an accounting.
When the estate cannot pay
If the estate lacks funds to pay the mortgage and other priority expenses, the lender may accelerate the loan and pursue foreclosure under applicable Iowa procedures. The personal representative must balance preserving the asset with protecting the estate from unnecessary expense; sometimes selling the property promptly (or negotiating a short sale) produces the best result to pay creditors and close the estate.
What heirs and beneficiaries should know
- Inheriting a home does not erase the mortgage. Beneficiaries who accept the property will inherit any liens.
- Heirs can choose to disclaim property, letting the estate and the mortgage remain for the representative to handle, but they should get legal advice before disclaiming.
- Family members sometimes pay mortgage or utility bills personally to protect the property; if they do so, they should document payments and consider whether they expect reimbursement from the estate.
Where to find the relevant Iowa law
For the duties and claims process in probate, see Iowa Code chapter 633: https://www.legis.iowa.gov/docs/code/633.pdf. That chapter describes appointment of the personal representative, inventory and accounting duties, and how creditors present claims.
This is not legal advice. The information above explains general Iowa probate principles only. Every situation differs. Speak with a licensed Iowa probate attorney to protect estate and personal interests and to get advice tailored to your facts.
Helpful Hints
- Notify the mortgage lender and utility companies right away. Early communication can preserve options.
- Preserve the property: maintain insurance, heat, and basic utilities to avoid damage that reduces value.
- Create an inventory and cash-flow projection to decide whether estate funds can pay ongoing expenses.
- Keep separate estate bank accounts and detailed records of every payment you make as personal representative.
- Ask the lender about short-sale, deed-in-lieu, or forbearance options if the estate cannot continue payments.
- Consult a probate attorney early when the estate includes real property with a mortgage to understand timelines, creditor rights, and sale options.