Frequently when the Seller is a surviving spouse of jointly owned property or a tenant in common, or one with a life use that has passed away – an “ownership interest in real property” – I am assured that the Seller’s have addressed everything necessary with the Probate Court to transfer ownership. In the great majority of cases, however, Seller’s have not addressed the Estate Tax Lien Release needed to close and the parties scramble at the last minute to obtain this Release.
Effective January 1, 2015, the Probate Court Fee must also be paid and a release issued (or a Secured Indemnity Agreement entered into) to close in these circumstances. Presented below is an update in this regard from CATIC. Please give this a thorough reading…
Bottom line, if the transfer is coming from an Estate, a surviving Joint Owner or the fiduciary of a Tenant in Common, or where there was a reserved life use in the property, please recommend to such Seller(s) that they contact their attorney early in the process. Much of the time these issues can be addressed without holding up the closing – if attorneys get involved early…
ANOTHER “SECRET” LIEN
Connecticut Public Act 15-05
(June Special Session) Sections 448 and 454
We know that, upon the death of an owner of Connecticut real property, by virtue of Conn. Gen. Stat. 12-398(d), an inchoate estate tax lien immediately arises in favor of the State. Even though no lien is then placed of record, the inchoate lien must be dealt with by anyone seeking to purchase the land from either the surviving joint tenant in a survivorship estate or the fiduciary of the decedent where the decedent died owning the property or an undivided interest in it as a tenant in common (or other situations in which the lien arises, such as the death of a settlor of a revocable trust where the trustee holds record title to real property, or the death of a life tenant holding a reserved life estate). A release of the inchoate lien must be obtained and recorded in order for the survivor, fiduciary, successor trustee, or remainderman to convey unencumbered title. In this article, the generic term “title successor” will be used to refer to these parties.
With the passage of Section 454 of P.A. 15-05 (June Special Session), effective July 1, 2015, but relating back to deaths occurring on or after January 1, 2015, the legislature has presented us with another inchoate lien to be dealt with when title is being conveyed by a title successor.
This section, part of the 2015 budget implementer bill, which also revised the amount of probate fees payable by the estate and removed the previous cap on those fees (Section 448 of the act), creates a lien in favor of the State to secure the probate fees payable by the estate on the real property of the decedent. The language creating the lien is substantially identical to that of the estate tax lien in that even though no lien is recorded, any person buying from a title successor is charged with notice of its existence.
The implication becomes clear for the real estate practitioner who represents a buyer and who may wish to issue a title insurance policy for his or her client and/or their mortgage lender by virtue of a deed from a title successor. In addition to requiring a release of the Connecticut estate tax lien, counsel will now also need to require from seller a release of the lien for probate fees from the probate court.
Where the releases of these liens are not forthcoming, you may still be able to close and insure, provided you obtain from a CATIC title counsel a secured indemnity agreement in which an adequate escrow amount from seller’s proceeds is held pending the obtaining and recording of the releases of each inchoate lien.
With the advent of this new lien for probate fees, the surviving spouse affidavit will no longer be allowed by CATIC in lieu of opening some form of a decedent’s estate in a Connecticut probate court in order to obtain a release of the estate tax lien and the release of the new probate fee lien.
By Jeffrey T. Walsh, Esq.
Jeffrey T. Walsh & Associates, PC
210 Main Street
Manchester, CT 06042