Bulletin: NL000087

Date:
April 24, 2000
To:
All Issuing Offices
RE:
Survival of Federal Liens after Disclaimers in Decedents' Estates
Dear Associates:

In many states an heir or devisee of a decedent may disavow (disclaim) an interest in property of the decedent's estate. A disclaimer by an heir or devisee usually results in title to the property vesting as if that heir or devisee had died before the decedent. The disavowing heir or devisee is then treated as never having owned the property, and under the law of many states, a state judgment or state tax lien against that disavowing devisee or heir will not attach to the disclaimed property.

Heirs or devisees will disclaim for estate tax planning, avoidance of creditors and other reasons.

For example: X, who is subject to a judgment lien under state law, inherits Black Acre from Y, but disclaims that property. Under the law in many states if X makes a proper disclaimer, X is regarded as never having owned Black Acre, and the judgment lien does not attach to the title.

However, the disclaimer is NOT effective to prevent a U.S. Judgment Lien or Federal Tax Lien from attaching to the property disclaimed by the heir or devisee. The U.S. Supreme Court ruled on this issue in Drye v. U.S., 120 S.Ct. 474 (1999). The Supreme Court held that state law did not prevail as to federal liens. Consequently, a Federal Tax Lien or U.S. Judgment Lien against a devisee or heir will not be defeated or affected by a disclaimer made by that disavowing devisee or heir.

Company Policy: Do not waive a U.S. Judgment Lien or Federal Tax Lien against an heir or devisee based on a proper disclaimer under state law.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
4.04 Decedent's Estates
 
6.08 Federal Tax Liens
Exceptions Manual:
None
Forms:
None