Your spouse just passed away, and everything your spouse owned had a joint or beneficiary designation. All of your spouse’s assets go to you without having to go through probate first.
End of story, right? Not exactly.
Did you know that you still have to file paperwork with the probate court? At the very least, a Connecticut estate tax return must be filed, even if no tax is due. Not filing can cause problems for you down the road, and here’s why.
All property have liens when one owner dies
There are two invisible liens that the State of Connecticut automatically places on real property when one of the owners passes away: The estate tax lien and the probate fee lien.
- The estate tax lien is placed on the property no matter if your spouse owed tax or not, and it stays on until any tax owed is paid or the Probate Court certifies that no tax is owed by issuing a Release.
- The probate fee lien is relatively new, having been introduced in July 2015. Just like the estate tax lien, it is placed on the property of every decedent in the State of Connecticut, but it is removed once the statutory probate fee (based on a percentage of the gross taxable estate) is paid.
What makes these liens tricky is that you won’t see them show up on the land records, but they will appear on a title search.
If a title search shows these liens, you will likely have problems trying to sell the property. It will show up as a defect in the title, raising a red flag for both the title insurance company and the prospective buyer. As a result, a buyer will likely not want to buy it, and for good reason: why assume the risk that estate taxes or probate fees may still be owed?
The other problem with keeping the liens on the property is that your spouse’s name will technically remain on the title until these liens are released.
How to remove the liens
Now that we’ve talked about the problem, how do we fix it?
Think about it this way:
The lien on the house acts like a lock that effectively prevents it from being sold.
What you need is a key, and that key is the Release from the Probate Court. They will not issue this Release until the estate tax return is filed and any necessary estate taxes and probate fees are paid.
What if you never plan on selling the property?
It is true that you may continue living in your house for the rest of your days and never even notice the liens on the property (after all, they are invisible). But what happens when you pass away?
Let’s say, for example, that your son inherits it and tries to sell it after you die. First, he has to file an estate tax return and pay the probate fee for your spouse’s estate, and then he has to do it for your estate.
Why leave him with that headache?
To obtain the “key” to release the liens on the property, you may just need to file an estate tax return, or you may need to open a full probate estate. It depends on the amount and nature of your spouse’s assets.
See a probate attorney, sooner rather than later, to advise on what exactly needs to be done to release your spouse’s probate liens.
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