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Special Liens for Estate and Gift Taxes

Posted by Brandon Keim | Oct 13, 2023 | 0 Comments

When it comes to estate and gift taxes, the Internal Revenue Service (IRS) can execute “special liens.” And special liens are indeed special because they differ from general tax liens in dramatic, fundamental ways. And it's not just heirs and estate executors who should know about these liens. Anyone buying property should also be aware of these liens—and if they aren't, they are buying at their own peril. 

First, it helps to remember what the IRS must do to obtain a “general tax lien” to understand just how differently the special estate liens operate.

Regarding unpaid taxes, the IRS can only issue a general lien after it has assessed the property, concluded there is a tax debt owed, and given a debtor a series of notices to warn them of the debt and the IRS's coming action against them. Once in place, the lien remains until payment is satisfied.

None of that applies to special estate and gift liens.

Instead, both are automatic liens against an estate, and they are created immediately after someone has died—even before the IRS determines the estate's tax debt. Next, the IRS does not have to notify the estate's representatives of the debt before creating these special liens, and the IRS doesn't need to record the lien before seizing the property. Even though unrecorded, these special liens take priority over other recorded loans.

And these “secret liens” can remain in force for ten years after the decedent's passing.

The special estate lien is also unique because the tax debt—and lien—can transfer automatically to any beneficiary or the property's successor-in-interest. In other words, a property buyer without knowledge of the secret lien on the property could end up liable for the tax debt. (That's why all property buyers should be checking in the chain of title to see if any owner's death occurred within the past ten years.)

Similarly, gift tax liens are also automatic and apply to any gifts made during a relevant return period. And while a gift's donor is responsible for gift taxes during their lifetime, the recipient is personally liable for resolving the tax relating to a gift lien.

And special estate and gift liens can be in addition to general tax liens.

That's why, if you have any concerns about estate or gift taxes, contact a tax attorney as soon as possible. Don't wait for the IRS to send a notice because it doesn't need to send one. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.


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