How mortgage payments and utilities are handled during probate in Tennessee
Disclaimer: This is general information only and not legal advice. Consult a Tennessee attorney about your specific situation before making decisions.
Detailed answer
When a person dies in Tennessee, their estate enters a legal process called probate. During probate, a personal representative (called an executor if named in a will or an administrator if appointed by the court) is responsible for collecting estate assets, paying valid debts, and distributing the remainder to heirs or beneficiaries. Two common concerns during probate are (1) continuing mortgage payments on real property and (2) paying utilities and other ongoing household expenses. Below is a clear explanation of how each is generally handled under Tennessee law and common practice.
1) Mortgage payments
– Mortgage obligations do not disappear when the borrower dies. The mortgage stays attached to the property until it is paid off, refinanced, or otherwise resolved. If the estate (or a beneficiary who keeps the property) does not pay the mortgage, the lender retains the right to pursue foreclosure under the mortgage contract and Tennessee law.
– The personal representative has a fiduciary duty to preserve estate assets. That duty commonly includes making payments required to prevent loss of estate property (for example, continuing mortgage payments to avoid foreclosure) when estate funds are available and when continuing payments is in the best interest of the estate and its beneficiaries.
– How mortgage payments are funded:
- If the estate has liquid assets (cash or accounts), the personal representative may use estate funds to make mortgage payments as part of administering the estate.
- If the property is left to a specific beneficiary (a devisee), that beneficiary can choose to keep the property and make payments personally or arrange refinancing. If the beneficiary takes the property subject to the existing mortgage, the debt stays attached to the property.
- If no one can or will keep paying the mortgage and the estate lacks funds to preserve the property, the lender can seek foreclosure. The personal representative may ask the probate court for authority to sell the property to pay debts if necessary.
– Practical steps the personal representative should take:
- Notify the mortgage lender of the death and provide the personal representative’s contact information and a copy of the letters testamentary or letters of administration once issued by the court.
- Determine whether estate funds exist to continue payments or whether a beneficiary will assume the loan.
- Keep records of any mortgage payments the estate makes; these payments are administrative expenses of the estate and may be reimbursable from estate assets.
2) Utility bills (water, electricity, gas, internet, trash)
– Utilities are typically considered ordinary household expenses necessary to preserve the estate property. The personal representative should prevent service shutoff when feasible, because loss of heat, electricity, or water can damage the property and reduce its value.
– Who pays utilities:
- If estate funds are available, the personal representative may pay ongoing utility bills as an administrative expense of the estate. These expenses are usually paid before distributions to beneficiaries.
- If a beneficiary is living in the decedent’s home, the beneficiary may agree to pay utilities directly in exchange for occupying the property. This agreement should be documented in writing and approved by the personal representative (and sometimes by the court) if it affects estate administration.
- If utilities are not paid, the utility company can discontinue service under its contract and applicable Tennessee utility rules. That discontinuation can harm the property and lower its value.
3) Priority and payment from estate funds
– In Tennessee, the personal representative pays valid claims and administrative expenses from estate assets before final distribution to heirs. Reasonable administration expenses (including expenses necessary to preserve estate property) are typically given priority. See the Tennessee probate statutes for the rules governing administration and payment of debts and expenses.
– If estate assets are insufficient to pay all debts, Tennessee law sets the order in which claims are paid and may require selling assets to satisfy secured creditors (like a mortgage). Creditors with security interests in property generally have priority to that collateral (for example, a lender with a mortgage on the house can foreclose if payments are not made).
4) When beneficiaries or co-signers are personally liable
– Beneficiaries are generally not personally liable for the decedent’s debts unless they co-signed the loan or otherwise personally guaranteed the debt. A co-signer or joint borrower remains responsible for the loan regardless of the borrower’s death.
5) Court involvement and relief
– If the personal representative needs to use estate funds in an unusual way (for example, to assume a mortgage, refinance, or sell property), they may file a petition with the probate court asking for instructions or approval. The court can authorize sales, compromise claims, and approve payments when necessary for proper administration.
For more about Tennessee probate statutes and the duties of a personal representative, see the Tennessee Code (Probate title) and Tennessee Courts resources:
Helpful hints
- Immediately locate the decedent’s mortgage and utility statements. Knowing account numbers speeds communication with creditors and utilities.
- Contact mortgage lender and utilities quickly to report the death and ask about options to avoid service interruption or foreclosure. Ask whether the lender offers a hardship or forbearance process after death.
- Secure the property and maintain insurance. Keep proof of payments and receipts for expenses paid by the estate—these may be reimbursable.
- Open an estate bank account only after you are appointed personal representative and have court-issued letters. Use that account to pay estate expenses, not your personal accounts.
- If you are a beneficiary and wish to keep the house, check whether you can assume the mortgage or refinance in your own name. Consult the lender about requirements.
- If you are a co-signer on a mortgage, get legal and financial advice promptly — you remain liable for the loan after the borrower’s death.
- Document any agreement between a beneficiary and the estate about living in the property or paying utilities. Put agreements in writing and get court approval if necessary.
- If the estate appears insolvent (assets won’t cover debts), consult a probate attorney right away. Insolvency affects priorities and may require court-supervised sales or claims handling.
If you are the personal representative or an heir with questions about paying a mortgage or utilities during probate in Tennessee, contact a probate attorney for advice tailored to your facts. Proper early steps can prevent foreclosure, service cutoffs, and disputes among heirs.