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I hold a mortgage on a house owned by a relative and his wife. They made the monthly payments for a few years, but haven't paid anything for more than twenty years.

Now that relative has died, and his widow says she's concerned that if I die, it will be difficult to sell her house. [Edit: Her stated concern, borne from her current situation, is that upon my death the mortgage might become the property of multiple creditors and the question of that ownership might take a long period to resolve.] She has proposed making monthly payments again if we immediately file that the mortgage has been satisfied. I realize the big disadvantage here - I'll have no recourse if she doesn't pay - but are there any other advantages I should be aware of?

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    She will have to pay taxes on the amount forgiven, or you may have to if it's construed as a gift. – Ron Beyer Oct 12 '20 at 17:56
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I don't think it would be significantly more difficult for her to sell her house if you die than if you don't. She would have to pay the mortgage [to your heirs in case you die] which she is already offering to do (because she is definitely going to pay it¡, right?).

Even if she doesn't have the amount to satisfy the owed amount X before selling, that's no reason not to have it sold. She would simply sell it for Y > X, then when it is being sold, X goes to you / your heirs, Y-X to her. It happens every day with mortgages hold by banks.

The part where there might be an advantage for her would be that if you die there may be multiple heirs she might need to deal with. If there is a single person, she could be able to convince it to settle for Z amount (Z < X), or to forgive she hasn't paid a dime in all those years. If there are multiple heirs, all of them would probably need to agree on that lower amount, not to mention that any of them could want to sue her for non-payment of the mortgage. If she was to make all the agreed payments, this shouldn't really be an issue for her, as your heirs wouldn't be entitled to receive an higher amount anyway.

You might want to please her by leaving that mortgage to a single person, but that complicates providing a balanced will, and getting payed this mortgage seems a can of worms on itself. A way to let your heirs off from this might be to set up a trust tasked to collect these payments, although that comes with its own costs (she will probably hate you for that as well, but at that point it's likely you won't care, and you are avoiding that trouble from your heirs).

I recommend you not to file that mortgage as satisfied when it's not. I see no benefit for you (and not that much for her, unless she is planning not to pay it). Plus, as mentioned by Ron Beyer, there may some legal costs for doing that. Not to mention how you / your heirs will feel when she stops paying again and she basically stole you/them that amount.

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  • I have found out this additional information (which is adequately addressed in your third paragraph about multiple heirs) and have added it to my question: Her stated concern, borne from her current situation, is that upon my death the mortgage might become the property of multiple creditors and the question of that ownership might take a long period to resolve. – Dev1 Oct 13 '20 at 15:53
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The widow's argument is specious.

If you die, your executor or trustee (depending upon your estate plan) will take care of your estate; that person will receive any mortgage payments still being made. Multiple or competing heirs are not, and will not be, the widow's problem or any concern of hers.

Her problem is making the mortgage payments, and her recent history is not encouraging. There's nothing to be gained by saying the mortgage has been paid off when it hasn't. If you say it has, you and your estate and your heirs will lose all leverage towards making sure the remaining payments are made. She will be completely off the hook.

You have nothing to gain by taking this action, and much to lose.

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