Creditor Attachment of Lien Claim to an Estate

Federal and state laws allow for creditor attachment to an estate. A lien claim is a debt collection order that can impact the value of an estate when become effective. Probate review of creditor attachment to an estate, can sometimes result in judgment lien which is the court ordered sale of personal and real property. Estate assets liquidated by a lien include family heirlooms such as antiques, fine art, jewelry, and other tangible valuables. Proceeds from dissolution sale of estate assets go toward satisfying a creditor attached lien claim that has been awarded in court.

Creditor Lien Claims

A lien claim is an enforceable creditor attachment that can interfere with estate asset transfer to beneficiaries and heirs at the time of a decedent’s death. Estate executors and trustees responsible for administration of estate trust and will designated assets, can avoid probate proceeding lien claim imposition by planning to pay-off a decedent’s debts in advance. Living trust and last testament and will directives made while an estate owner prior to death, can sometimes resolve debts according to their wishes. Executors, trustees, beneficiaries, and heirs are not personally responsible for the payment of liens incurred before an estate owner died.

Involuntary” vs. Voluntary Liens

The categories of “Condo/Co-op Dues and Maintenance/Homeowner Fees” liens, “Mechanic’s and Materialmen’s” liens, and “Tax” liens all fall under the category of “involuntary” lien within most state laws. Mortgage liens are “voluntary” liens attached to real property assets, sometimes removable once the debt is paid if permitted under state rules of attachment. Most liens are on record for ten years regardless of if the debt has been satisfied. A claim of lien may also force estate assets into a probate proceeding. Probate review of liens can result in substantial losses affecting the total value of transferred assets intended for the enrichment of named beneficiaries.

Encumbrances and Exemptions

While an estate owner is still living, collection from a judgment lien is subject to restrictions under state laws of estate, as provided for in New York law, which exempts debtors from financial encumbrances inhibiting quality of life (N.Y. C.P.L.R. §§ 5201 – 5253). Generally, the property exempted from creditor attachment of estate assets, is the debtor’s primary residence. At time of probate court review, estate attached creditor collections and lien claims on estate held property may also be found to be encumbered by existing liens, foreclosure, or bankruptcy matter. Any motion to escheat proceeds to state coffers is preempted by an estate’s outstanding debts to creditors.

Notice of Lien Claim

State rules such as New York Laws CVP – Civil Practice Law & Rules, Article 52: Enforcement of Money Judgements §5202 and §5203 are statutory rules for lien attachment procedure. A Claim of Lien must usually be filed with the County Office of the Clerk where an estate will be reviewed by probate court. Most states allow for more than six months period statute of limitations for court review of creditor attached claim of liens on estate properties. Once a lien claim is attached, the estate must be served with a Notice of Lien within a stated period. Planned giving specialists involved in the planning of estate contribution to nonprofit charitable giving plan, will want to learn more about this topic.

A creditor attached lien claim is a debt collection order that can impact the value of an estate when become effective via forceable dissolution of assets intended for beneficiary enrichment.

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