Let’s jump right into the topic of judgment liens and how they can thwart your estate planning plans.

In Colorado, once a party to a lawsuit has won a judgment, he or she can convert that into a judgment lien by filing what is called a transcript of judgment with the clerk and recorder in any given county. For a period of six years (or twenty years if the judgment is revived), any property in that county owned or acquired by the person the judgment is against (called the judgment debtor) will automatically have a lien on it to satisfy the judgment.

So let’s say dad has two children and one of them has been down on his luck and has moved back home. Dad may not appreciate the full extent of kid’s bad luck but wants to help him out and gives him a free room. Dad wants to do some estate planning and decides to put both kids on the title to the house with him as joint tenants so that when he passes away the house will automatically pass to them. Later, dad changes his mind and the kids all pass title to the house back to dad.

When dad passes away, probate is opened and the estate needs to sell the house to pay debts. The house is put up for sale and goes under contract. When the title work comes back it shows that a transcript of judgment was recorded in the previous six years while kid was on title. The title company insists that it will not issue the title policy until the judgment is paid off. Since there is not enough equity in the house, and since there is more than one beneficiary, the estate suddenly has a very large and very unexpected problem.

The question of whether or not there is an enforceable lien is a very complicated question. It might involve a lawsuit to quiet title or negotiating with creditors to settle things. What is important to remember is that putting someone else on the title to your property — whether for estate planning or other purposes — can expose that property to their judgments. Even judgments that have happened in the past.