Liens, Real Estate, and Your Estate Plan

Buying real estate can be an essential component in your strategy for long-term financial security and stability.  A family home, rental property, or vacation cabin can all be excellent vehicles to ensure solidity and permanence for your friends and family after you are gone.  When your estate is being distributed, the debts will have to be paid before the assets can be distributed.  If you own real estate, liens may be part of those debts.

A lien is placed against a piece of property when the owner is in debt to a particular creditor.  The property then cannot be sold and title cleared until the lien is resolved, usually from the proceeds of the sale of the real property.  In the context of estate planning, Medicaid liens are an important consideration.  Medicaid allows you to obtain medical care, such as nursing home funding or just typical doctor visits, after you reach a certain age.  To be eligible for Medicaid, you cannot have above a certain amount of income or assets.  After you pass away, the government may try to recover the costs of your care against your estate.  To ensure that they actually receive payment, Medicaid can and will put a lien on your real property, which is often your primary residence in this context.  However, with marital homes, it is often the case that the surviving spouse still lives in the home.  If that is the case, Medicaid can still place the lien, but cannot force the surviving spouse to sell the home to satisfy the lien.

Liens from the Internal Revenue Service are also important to consider when estate planning.  Where an estate is of sufficient value that estate taxes may be owed, the IRS can place a lien on the real property in the estate until the estate tax debt is satisfied.  Particular forms will have to be filed with the IRS before the lien is conditionally released and the property sold.

If the real property is a rental property, estate planning can help with the issue of the IRS tax lien.  Where the real estate is held by an LLC instead of directly by the decedent, the real property can be sold without the need to complete an IRS waiver, thus simplifying the process.

We have experience helping our clients understand the need for proper estate planning and how to protect their real estate. Call us today at 651-413-9568 and we will talk with you about your property