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I think the liability depends on who the house was given to in the will. if it was explicitly given to the children(for example) in the will and it is currently owned by the estate as the estate process is sorted through until the property can be distributed out, then the beneficiaries of the estate are liable.
On the other hand, if the estate itself was named as the receiver of the house(and possibly other assets), and then the executor has some control/power to decide which property each beneficiary will receive on dissolution of the estate, then the estate itself would assume liability....
I have some knowledge of these issues, but am not an expert. I strongly suggest you talk to your attorney about these issues. They can be very complex, and can vary for each state....
Another point....
If the house is going to be sold at a loss, then the loss can be absorbed by the estate as well. In that case, it would reduce, or eliminate any tax that the estate has to pay on its own income....
Estate have to file a 1041 if they have income >$600
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