Attorney Thomas B. Burton answers a reader's question about whether creditors can place a lien on the mother's home for the debts of a child who was added to the deed of the home by the mother, and who is listed as a co-owner of the home.
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Transcript of Video: Can Creditors Put Lien on Mother's House For a Child's Debts Who is Listed on the Deed?
Today's question has to do with creditor
claims and real estate the reader asked
can creditors put a lien on our mother's
house from one of our siblings whose
name is on the deed and owes creditors
but has passed one of our siblings who
was listed on the deed of our mother's
house has passed a owes substantial amount
of medical and other debt could they put
a lien on her portion of the house even
though she is deceased so it sounds like
the mother put her children on the name
of her deed of her current home but the
mother's still alive now this is
unfortunately a very common estate
planning technique where the parents try
to avoid probate on their death by
adding the children to the deed while they
are alive the reason I often warn against
this is exactly what's going on here if
you put your children on the name of the
deed now they become current co-owners
of the property that means if they have
creditor issues and the creditor goes
looking for an asset to put a lien
against it's very easy to research the
real estate records and see that your
son or daughter's name is on the deed to
your house now oftentimes you work your
whole life to buy a house to pay it off
and have it solely in your name so when
you put your child on there and they
unfortunately sometimes through no fault
of their own like in this case have
medical bills that asset can become
subject to claims of creditors for this
reason I recommend you leave your home
at death to your children through your
Will or the best is to avoid probate by
leaving it through a trust then it
transfers at death and they also get the step
up or new basis upon your death so that
if they sell the home they take the
asset at the basis it's valued at your
death versus the basis you bought it at
and what I mean by basis is the tax
basis often if you owned your home a
long time you bought it many years ago
for a much lower price when your
children go to sell it they would owe
capital gains on the difference between
what you
paid and the place they sell it for if
you add them during your lifetime if you
leave it to them at death the tax law
grants them what we call new basis at
death and they can often sell it at that
new basis and owe little or no capital
gains at the 15% tax rate so I'm sorry
to hear about the situation but because
your deceased sibling is on the deed
it's possible the creditor could go
after that asset now if your sibling
passed away and there's been no probate
opened you'll have to see what's going
on there with creditor claims generally
for the deceased sibling there's a
period of time for creditors to present
claims so you may or may not want to
open a probate for that sibling
in order to get that timeline running I
recommend you speak with an experienced
probate attorney in your area before you
proceed because there's a lot of issues
here and doing it one way versus the
other could end up costing you and your
mother and your house a lot of money so
good question and thank you for asking!
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