Thank you for your considered response, "someone"
ISTM that the executors have to find someone to accept the 70k of debt in return for 70k of the asset or they have to repay the 70k of debt (either by selling (a share of) the asset or from other resources in the estate)
Given that if it is an ongoing rental business, and if the bank is satisfied to continue with the remaining borrower, the LTV is quite low, the existing borrower would automatically be assuming the whole debt from his / her share of the equity.
So: the children get 325/470.
the mother gets 75/470
Someone or more than one person, gets 70/470 in return for 70k of debt.
From an accounting PoV it makes zero difference who that someone is, the estate is losing nothing of value.
This seems a sensible way of doing it. But my question was that should it be divided as 325/400 and 75/400 ? and distribute the 70k debt to the two in the same ratio.
I would assume that if the mother and children can agree on who gets the 'worthless' share (and in what proportions) then the executors should do it that way. If nobody is willing to accept liability for the debt then the executors may be forced to sell the share in the estate. And if everybody wants the worthless share then ask a lawyer who has the right to it (but my guess would be the mother in the same way she (presumably) inherits everything else that has no value)
Not sure if mother would have any more right than the children, because if the mortgage share were 145K or higher, then mother would be getting o or even negative equity from the estate.
In any case who gets notional share of the indebted property would be of some significance because whoever gets the debt will get the right to "release" the underlying equity from the bank by paying off the loan from their share of the income. So even though it is worthless at the time of death, it represents a right to "redeem" valuable equity (most probably more valuable then the debt itself by the time it gets paid off)
The children may have to pay higher rate SDLT if they take on a share of the mortgage.
Not sure why SDLT will be involved - if mortgage in not transferring to anyone other than the original borrower.
Regards