Let’s say that a parent leaves her house to her three sons upon her death. The executor hires an attorney to have the deed retitled in the three sons' names, so they could take possession of the house. However, the attorney may have to deliver some bad news: it can't be done because the oldest son has a child support judgment and the executor must sell the house. Does that sound right?
nj.com’s recent article entitled “What child support judgment means for inheritance” explains that judgments can complicate things. A judgment for child support is a lien against an inheritance, and that lien has priority over all claims other than taxes owed by the estate.
Typically, an executor must conduct a child support judgment search before making distributions to a beneficiary. If a child support judgment is outstanding and is greater than the inheritance to be paid the beneficiary, the executor must pay the entire amount to partially satisfy the judgment.
If the inheritance is more than the child support judgment, the executor will pay the judgment amount owed and when he or she gets a satisfaction of judgment, the balance will be distributed to the beneficiary.
Executors usually are given some leeway to pay property in kind. This means that they can distribute the house to the three sons as the beneficiaries or liquidate the property and distribute it in cash. However, when distribution in kind isn’t an option, liquidation may be the only option.
If this type of situation is one you are questioning, speak with a knowledgeable estate planning attorney. This is because liquidating the house may be avoided, depending on additional facts and the amount of the outstanding child support judgment.
One option is for the two other sons to lend the third son the funds to pay off the child support judgment and in return take a larger share of the house or other security for repayment. That way, the house wouldn’t need to be sold.
Once the child support judgment is paid off, and a new search shows no outstanding liens, the house could be distributed as the parties agreed.
Another option would be to leave the assets to your children in a way that they could be protected from Creditors, such as an Inheritance Trust.
If you have an intended beneficiary with creditor or potential creditor issues, sit down and discuss this with your estate planning attorney. An experienced estate planning attorney can give you all the available options, including leaving the assets in a trust, to be certain that your testamentary intent is recognized, and your beneficiary's assets are protected.
Reference: nj.com (February 21, 2018) “What child support judgment means for inheritance”