Do My Brother’s Creditors Have a Claim to My Inheritance?

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If you have recently learned that you are to be the recipient of an inheritance, you may very well have a number of questions. After all, it’s not every day that one must make sense of the confusing rules and laws regarding NJ estates.

Oftentimes, you will find that the deceased has divided their estate among several of their closest relatives and/or friends. Everyone who is named in the deceased’s will is known as an heir or beneficiary. Frequently, when a parent passes away, they will leave at least part of their estate to their adult child(ren).

A question that we encountered recently involved a New Jersey estate wherein the decedent left her entire estate, including her home to be divided among her three children. The home was to be sold and the proceeds also then split between the three heirs. The rest of her estate included a moderate amount of money along with some additional valuable assets that would, again, be liquidated and divided equally.

It was discovered that one of the three beneficiaries was in over his head in debt. He had debt collectors calling him constantly, and liens were placed on any money that he may receive via judgements or inheritance. This made the other two heirs extremely nervous about the security of their own portions of the estate.

They wondered, “Will our brother’s creditors have a claim to the entire estate?”

This is a very legitimate fear, but luckily one beneficiary’s poor financial decisions will almost never affect his co-beneficiaries. While it’s true that his creditors do indeed have a cause of action against his portion of the inheritance, they have no claim whatsoever to anything that was willed to any other beneficiaries.

The exception here would be if one of the other beneficiaries was the spouse of the indebted heir, and even then, creditors would only be able to take the spouse’s portion of the inheritance in community property states, which are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska leaves the decision about community property up to the couple.

In New Jersey, debts that were incurred (by the beneficiary in question) jointly with a spouse who is also named as a beneficiary of the estate at hand may leave the spouse responsible for debt repayment.

Additionally, even if the debtor/beneficiary incurred his debts without his spouse as a co-signer, his spouse may still be held responsible if some or all of the debts were acquired for family necessities.

Other than those nuanced situations, an indebted beneficiary’s creditors will not be able to come after any assets willed to other heirs of the same estate. If any property is left to the indebted beneficiary with the intent that he share the physical property with you and/or one of the other heirs (where the property is not to be sold and divided), it’s in your best interest to work with an estate planning attorney in New Jersey so that your interests are protected.

Image credit: thethreesisters

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