Question:
My father owned a property when he died and the property had a mortgage lien attached to it. Do I have to clear the lien on the property before I can begin a probate to distribute the property?
Answer:
No.
Although you may go forward and begin the probate, the mortgage lien will be an issue and will need to be resolved before the probate can be closed.
If you open a probate and there are cash assets available, you may petition the court to allow the cash assets to be used pay the mortgage and keep it current. This will remove the lien, thereby allowing the property to be distributed to the beneficiaries at the close of probate or when sold.
In the event the petition is not granted and the property must be sold with the lien attached – the mortgage lien will be extinguished when the loan is paid off at the close of escrow. It is best to consult an attorney before filing a probate petition with the probate court.
Problems like this can be avoided with proper estate planning.