[WSBAPT] case law on estate not liable to HEIR's creditors?

[Eric Nelsen]

Nick, that's an interesting wrinkle re DSHS's argument that the lien attaches to the decedent's real estate. I agree with you that the DSHS lien does attach to the heir's inheritance expectancy in the estate as a whole, meaning the PR can't make any distribution to the debtor heir without paying the lien debt first. If the heir's share isn't enough to pay it off in full, then the debtor heir gets nothing.

But as for the decedent's real estate, I think DSHS's position doesn't gain it anything useful if there is a probate administration. The only thing its lien can attached to is property owned by the debtor heir. The debtor heir's interest is subject to complete divestment by the probate administration. Even RCW 11.04.250 says that. So the lien "attaches" instantly to the debtor's inheritance interest but the debtor's interest is completely subordinate to the Estate's right to sell the real property. It's there so long as the PR doesn't sell and it's gone the instant the PR sells. That means the PR can sell the property without having to satisfy the lien, but can't distribute to the debtor heir until the lien is satisfied.

If there is no PR ever appointed, though, then DSHS's assertion of a lien is meaningful. But I question how effective it will be, unless the lien is recorded in the real property records and legally describes the property. I don't see that the lien, which is only in the debtor's name, is ever going to provide notice to a bona fide purchaser, until there is some kind of property record transferring the decedent's interest to the heir.

Clear as mud.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis. Please direct mail and deliveries to the Seattle office.

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Nick Pleasants
Sent: Tuesday, January 3, 2023 2:13 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] case law on estate not liable to HEIR's creditors?

When I researched this last year, I concluded that an heir's creditors could have an enforceable lien against the probate estate. The creditor was heir's ex-spouse who was owed child support, and DCS was handling enforcement. DSHS recorded a lien for DCS. The decedent had real property that was up for sale in the probate. Title company did not consider the lien against heir to attach to decedent's property, so we could have sold it without telling DSHS/DCS. However, DCS had a theory that title in decedent's real estate immediately vested to the heirs at death, so DCS considered its lien validly attached to decedent's real property.
Your facts may differ if the heir's creditor has not already reduced it to judgment, which could then be recorded as a lien. But my impression is that if the creditor obtain judgment against an heir, and then records that judgment in the county where the decedent has real estate, then it could be considered a lien against the decedent's real estate based on the instantaneous vesting in RCW 11.04.250<https://app.leg.wa.gov/rcw/default.aspx?cite=11.04.250>.
I agree with Eric's point that the estate would at most be a garnishee at the time of distribution. That seems to be the right way to analyze it.
Best,
Nick

Nicholas Pleasants | Shareholder

[OseranHahnAttyatLaw 8]

11225 SE 6th Street | Suite 100 | Bellevue, WA 98004
Main: (425) 455-3900 | Fax: (425) 455-9201 | E-mail: npleasants at ohswlaw.com<mailto:npleasants at ohswlaw.com>

CONFIDENTIALITY NOTE: This e-mail message contains information belonging to the law firm of Oseran Hahn, P.S., which may be privileged, confidential and/or protected from disclosure. The information is intended only for the use of the individual or entity named above. If you think that you have received this message in error, please e-mail the sender. If you are not the intended recipient, any dissemination, distribution or copying is strictly prohibited.


From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Eric Nelsen
Sent: Tuesday, January 3, 2023 1:43 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] case law on estate not liable to HEIR's creditors?

Thanks Phil!

I haven't had much response and there really doesn't appear to be much case law on point. With a "hail Mary" search in WA case law with the words "heir" "creditor" and "estate" in proximity, the only case that even came close to being useful was Archer Blower & Pipe Co. v. Archer, 33 Wn.2d 317, 319, 205 P.2d 595 (1949), citing Island Pond Natl. Bank v. Chase, 101 Vt. 60, 141 A. 474, 59 A.L.R. 766 (1928). In Archer, the creditor was a true creditor of the decedent, not an heir. But when their claim was rejected they tried to garnish the Estate instead of filing a proper suit. For authority they tried to cite case law regarding an heir's creditor garnishing the estate of the decedent. Reading the Vermont case mentioned was at least a little helpful on general principles of when and how an estate might be responsible for paying an heir's debt.

For what it's worth, here's what I am using in my briefing:

By naming the Estate as defendant, Plaintiff is effectively suing the Estate for a debt not owed by the Decedent. In litigation, the PR of the estate of a decedent merely substitutes for the deceased person. If litigation is pending at the time of death, the PR may be substituted for the deceased party. See RCW 4.20.050; RCW 11.40.110; CR 25(a); Petrarca v. Halligan, 83 Wn.2d 773, 522 P.2d 827 (1974). If the person to be sued is already deceased, a creditor claim is filed, and if rejected, the plaintiff creditor then sues, naming the Estate as defendant in place of the deceased. See RCW 11.40.010; RCW 11.40.100(1). Such litigation is governed by the same rules as would have applied to the living person. See, e.g., Schluneger v. Seattle-First Natl. Bank, 48 Wn.2d 188, 190, 292 P.2d 203 (1956) (creditor litigation is an ordinary civil action, not part of probate procedure).

Further, it is axiomatic to probate administration that an heir's interest is subject to the claims, fees, expenses, and other necessities of probate administration. Because of this, an heir's interest in an estate "may be divested by the process of administration." Bickford v. Stewart, 55 Wash. 278, 286, 104 P. 263 (1909). Only after an estate is closed can an heir treat inheritance property as their own. In re Peterson's Estate, 12 Wn.2d 686, 734, 123 P.2d 733 (1942). Accordingly, even a garnishment against an heir's interest in an estate is ineffective until a final decree of distribution has been entered and the heir's distributive interest is fixed. Cf. Archer Blower & Pipe Co. v. Archer, 33 Wn.2d 317, 319, 205 P.2d 595 (1949), citing Island Pond Natl. Bank v. Chase, 101 Vt. 60, 141 A. 474, 59 A.L.R. 766 (1928) (dicta). While the action here is not a garnishment, the principle is clear that Plaintiff may not attack the debtor heir's inheritance interest by suing the Estate directly. It also should be clear as a practical matter that a judgment against the Estate cannot be proper relief for Plaintiff, because if the judgment amount exceeded the debtor heir's actual inheritance, the Decedent's other heirs would end up liable for the remainder of the debt. No law or equitable principle supports such a result.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis. Please direct mail and deliveries to the Seattle office.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Philip N. Jones
Sent: Tuesday, January 3, 2023 10:52 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] case law on estate not liable to HEIR's creditors?

I don't have a Washington answer, but I do have an Oregon answer that might lead you to a Washington answer.  Here is a paragraph I wrote for an Oregon CLE program:


A personal representative does not have a duty to creditors of a beneficiary, because the definition of interested persons under ORS 111.005(19) does not include creditors of a beneficiary, and ORS 114.395 provides that a personal representative has duties to interested persons, but does not state that the personal representative has duties to persons outside of that definition.  Thus it appears that a personal representative should neither aid a creditor seeking to collect from a beneficiary, nor aid a beneficiary in concealing assets.  However, if a creditor garnishes the distributive share of a beneficiary, then the creditor becomes a distributee/beneficiary, and the personal representative then has duties to that creditor as a distributee/beneficiary.

Phil Jones


Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 - office
(503) 853-1482 - cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Eric Nelsen
Sent: Tuesday, January 3, 2023 9:43 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] case law on estate not liable to HEIR's creditors?

Happy New Year everyone! I have been circling the drain on research that I am pretty sure is out there-a case that makes clear that an estate is not liable in any way to an heir's creditors. Can anybody help me with a cite?

Thanks,

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

Covid-19 Update - All attorneys are working remotely during regular business hours and are available via email and by phone. Videoconferencing also is available. Signing of estate planning documents can be completed and will be handled on a case-by-case basis. Please direct mail and deliveries to the Seattle office.

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20230103/05466ac9/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 10176 bytes
Desc: image001.jpg
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20230103/05466ac9/image001.jpg>