Charging Liens: What Happens To Lien After Debtor’s Death

A creditor gets a charging lien against distributions from a limited partnership to the debtor limited partner. The partnership makes little or no distributions during the debtor’s lifetime. The debtor dies leaving his partnership interest to his children. What happens to the charging lien?

The question turns on whether the charging lien is imposed on the property, the partnership interest, or whether it is against the debtor who is the recipient of money distributions from the property. If the charging lien is against the interest then it should be treated like any other property lien, such as a mortgage, and survive the debtor’s death. The lien would give the creditor the right to partnership distributions after the debtor died and the partnership interest was assigned to the children. If the lien is against the debtor, then the lien would not apply to partnership distributions after the debtor died.

I have not researched this issue but I think that the charging lien is imposed upon the partnership interest and is a lien on property. The debtor’s heir would inherit the debtor’s partnership interest by will or living trust subject to the lien. The children would inherit the same interest owned by the decedent- a partnership interest subject to a charging lien. I am not aware of a legal reason why the debtor’s death would strip the charging lien from the partnership interest or otherwise deprive the creditor of the interest perfected during the debtor’s lifetime.