21 Feb Child support judgment and an inheritance

Q. My mother-in-law recently passed. According to her will, she left her house to three sons. The executor hired a lawyer to have the deed put in the three sons’ names so they could take possession of the house, but the lawyer said that can’t be done because one son has a child support judgment. That means the executor must sell the house. Is it correct that the deed can’t be transferred because one son has a child support judgment?
— Trying to figure

A. Judgments can make a mess of things.

In this case, a judgment for child support is a lien against an inheritance, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

Plus, she said, the lien has priority over all claims other than taxes owed by the estate.

“An executor of the estate is required to perform a child support judgment search before making distributions to a beneficiary,” she said. “To the extent 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 the appropriate probation department in partial satisfaction of the judgment.”

If the inheritance is greater than the child support judgment, then the executor pays the judgment amount owed and upon obtaining a satisfaction of such judgment, may pay the balance to the beneficiary, she said.

Romania said executors are given broad discretion to pay property in kind — such as to distribute the house to the three sons as the beneficiaries — or to liquidate the property and distribute it in cash.

Unfortunately, she said, where distribution in kind is not an option, liquidation may be the only alternative.

Romania said liquidation of the house may be avoided depending on additional facts, in particular depending on the amount of the outstanding child support judgment.

“For example, if two of the sons have sufficient funds and are willing to lend the third son the money to pay off the child support judgment and in return take a greater share of the house or other security for repayment, the house would not need to be sold,” she said.

In that case, once the child support judgment was paid off and a new search indicated no lien outstanding, the house could be distributed as the parties agreed, she said.

“If you have an intended beneficiary with creditor or potential creditor issues, it is important to inform your estate planning attorney,” she said. “An experienced estate planning attorney will be able to discuss options, including leaving the assets in trust, to ensure that your testamentary desires are fulfilled and your beneficiary’s assets are protected.”

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This post was first published in February 2018.