This debt can have serious consequences for Boomers and their families. Let’s say, for example, that Hank and Mindy are in their 60s and want to sell their home, but a $60,000 tax lien on the property makes it difficult. They want their son Max and his wife Clara to pay the back taxes, and they’ve promised to pay them back from the proceeds of the sale.
Clara is understandably nervous about this arrangement. And before Clara and Max act, they need to understand the risks of helping out his parents.
Paying off someone else’s tax lien may be a bad idea
While Max wants to help his parents, Clara is absolutely right to be concerned.
For one, the fact that Hank and Mindy have a tax lien on their property in the first place is a major red flag. Per the IRS, a lien is only put on your property if you fail to pay a debt.
In most cases, you have multiple options to avoid a lien on your home, including paying your tax bills on time, entering into an IRS payment plan, or participating in programs for seniors who can’t afford property taxes. The fact that Hank and Mindy let things get to this point strongly suggests their finances are far from stable.
The problem for Max and Clara is that they could pay off the debt, and Max’s parents could change their plans to sell and stay in the home without paying Max and Clara back the full amount. Or Hank and Mindy could pocket the home sale proceeds without providing full repayment.
Hank and Mindy could also have other debts on the house, all of which would have to be satisfied when the home is sold. “Just because the tax lien is paid off doesn’t mean there aren’t other liens, mortgages, or judgments against the property,” Nick Panize, the president of Westgate Capital Ventures, told Moneywise.
If Hank and Mindy owe more than the home is worth, even after the tax debt is resolved, they may not be able to pay back the $60,000 they borrowed.
Are there other options beyond paying off the lien for them?
If Max and Clara choose not to give his parents $60,000, they can help them in other ways. One way to do that is to help them explore the possibility of pursuing tax relief. However, whether that’s possible or not depends on the kind of back taxes they owe.
