- April 24, 2000
- All Issuing Offices
- Survival of Federal Liens after Disclaimers in Decedents' Estates
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.
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