You need to get yourself to a lawyer to review the documents. Maybe some real estate attorney will disagree, but my understanding of a lease is that it can't be perpetual. A perpetual lease is a freehold- the lessor would own the property. Are you sure you are not describing a life estate? Meanwhile, if the mortgage is not serviced, the bank will foreclose and you won't have any legal problem at all, or a place to live either. You should be using the rent payments to service the mortgage. As far as the life insurance policy is concerned, you need to get to a lawyer for an opinion whether you can successfully litigate to get payment. If the insurer's refusal is unjustified and you have a strong case, you should be able to hire a lawyer to take the case on a contingency. For advice about the estate, you need an estate lawyer, and you will have to pay an hourly rate.
Any opinions stated in response to Avvo questions are based upon the facts stated in the question. Responses to Avvo questions are for general information purposes only, and should not be construed or relied upon as legal advice.
I would have an insurance law attorney review the situation with you, because the insurance could solve a multitude of problems, if it pays out. The facts of your case will determine the answer and you have not included them in your summary. I would meet with an attorney right away. Best of luck to you!
*** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state.
I agree with my colleagues who have encouraged you to retain an attorney. The life insurance issue needs to be addressed as quickly as possible. If the company can be made to pay out the death proceeds, that should go a long ways towards solving the problems you've described. If, on the other hand, the company is legally justified in refusing to pay on the policy, you may be able to negotiate a "short sale" or "deed in lieu of foreclosure" with the bank. Without knowing more facts, however, I couldn't say which of these options might be better for you.
I realize that good legal advice can be expensive, but the problems you've described are not ones you should try to resolve on your own. If you choose not to hire an attorney, then you should probably consider resigning your position as the Executor of the estate, as you could become personally liable to other estate beneficiaries (if there are any) if the estate is not properly administered.
DISCLAIMER: The foregoing is not intended to constitute legal advice, or to create an attorney-client relationship between us (See paragraph 8 of Avvo Terms and Conditions of Use). It is offered, instead, as general legal information relevant to the issue(s) raised in your question. Legal information is not the same as legal advice (i.e., the application of law to an individual's specific circumstances). If you desire to obtain legal advice, you should retain the services of an attorney to represent you. If you choose to act upon the information provided above without first retaining an attorney, you do so at your own risk.