Q: When splitting up the money left in an estate, how do I take out judgements against beneficiaries paid by the estate?
I have 2 siblings, both of which had separate judgements paid off by the estate when we sold the family farm. The siblings along with myself were listed as co-owners of the estate when my dad passed, so the judgements had to be paid before any funds from the sale were released. I shouldn't have to pay a share of each judgement, correct? How do I as executor go about taking the judgement amount out of each of their shares of the estate funds? For example: Sibling A had a $5000 judgement paid off by the estate. Do I split the estate funds 3 ways (A, B, C), then take the $5000 out of their share and split it between Sibling B and Sibling C?
A: Take the net proceeds of the sale and add back the amounts of the judgements that were paid, then divide that sum by the number of equal shares. Each beneficiary’s share is that quantity less the amount of judgements paid on his or her behalf.
Richard Sternberg agrees with this answer
A: It's a simple accounting matter, but auditors in different counties may insist on different reporting of the distributions to pay off the individual judgments secured by the estate property. Most counties have posted their accounting principles on the probate website of the Commissioner of Accounts. Consult that, or make an appointment to visit the Commissioner's office in your county. Or, of course, you can retain qualified counsel to assist in preparing the estate accounting.
My first question is HOW was the property sold? Did the two heirs sell it or did the estate sell it? In other words, was the money paid to the heirs or to the estate administrator? If the heirs sold it and the money was distributed to them, then there shouldn't be an issue.
However, if it was sold by the estate and the stupid idiotic closing agent and ignorant title insurance underwriter (you may quote me) insisted that the judgments against the heir had to be paid by the estate (in my strong opinion they are wrong on the law; I'm pursuing a court case on that point now) then it is a matter of math.
You should have a lawyer advising the estate - there are too many things that can go wrong that people don't know about and can cost money. So rather than do the math formula I'd use, see a lawyer
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