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RE Q&A: Can a Creditor Take a House I Just Inherited?

The owner of a newly inherited home lost a lawsuit years earlier and still owes money, but the simplest way to shield a home from legal creditors is to live in it.

FORT LAUDERDALE, Fla. – Question: I have a fairly large judgment against me from a lawsuit I lost a few years ago. I just inherited a house from a relative that passed away. Can my creditor take this? – Barb

Answer: It will depend on many factors. Generally, a judgment creditor has a variety of ways to try to get paid back. They can garnish your wages and your bank account; lien certain property you own, ensuring they get paid when you sell the land; and, in certain circumstances, even force a property to be sold. If this happens, you will get any proceeds left over after they are paid.

However, precise procedures have to be followed for them to take these actions. In my experience, many creditors do not follow these guidelines, providing a defense when they try to get your property to satisfy the debt.

Some property is exempt from creditors’ claims. The exemptions vary depending on your circumstance, but generally, your home, head of household wages, retirement savings and disability benefits are protected. This means that if you decide to live in the house you just inherited, it should be safe from your creditor.

The best way to protect this property from going to your creditor is for you never to inherit it in the first place. Many estate planning trusts will include terms, called a “spendthrift clause,” that will stop the trust from transferring the property to you if it will just go to your judgment holder instead.

If this protection was not set up before your relative passed, another option is to “disclaim” the inheritance. When you follow this procedure, you are surrendering all rights to the house, and it will pass to the next heir in line to inherit as if you had passed before your relative.

Your final option, while not particularly pleasant, is to negotiate a settlement with your creditor that allows you to keep a portion of your inheritance while getting this judgment satisfied.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show Legal News and Review. He frequently consults on general real estate matters and trends in Florida with various companies across the nation.

© 2019 Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by Tribune Content Agency, LLC.