When Loved Ones Pass: What You Need to Know about the CT Estate Tax Lien

When a person passes away, their loved ones left behind are undoubtedly thrust into one of the most trying times of their lives.  The harsh reality is that the person charged with the responsibility of handling the deceased’s affairs (the “Executor,” “Trustee,” or “Administrator,” as the case may be) most often enjoyed the closest relationship with the deceased, and is therefore experiencing much grief as the probate process begins.

 

Most of us know “probate” to be the excruciating process of carrying out the administration of a loved one’s estate.  Despite this general awareness, most members of our community do not have a full understanding of all of probate’s components, and the exact implications of failing to properly complete the process when a loved one passes.  To some, “ignorance is bliss” when it comes to such unpleasant topics.  To that, I can genuinely say that I fully understand.  Nevertheless, “knowledge is power” when dealing with any venture life throws our way.  Which brings us to the topic of this article…

 

What is the CT Estate Tax Lien?

The CT Estate Tax Lien is an “inchoate” (i.e., invisible) lien attached to any real estate, owned in whole or in part, by any person who has passed away.  The lien attaches automatically upon the property owner’s passing, and remains on the property until such time as a Lien Release is obtained.  In the meantime, the house will be “encumbered,” meaning that the lien will appear in a title search, making it essentially impossible to sell.

 

So how do you “release” the lien?  Proper navigation through the probate process is your answer.  In Connecticut, no Estate Tax is due unless the deceased’s estate exceeds $2M (or $4M if married, and with proper Estate Planning).  So, the estate’s representative must prove that the estate’s value fell short of $2M, or in the alternative, pay the associated Estate Tax.  This is accomplished through the preparation and filing of a CT-706 NT (if $2M or less) or the CT-706/709 (if over $2M).  Once the applicable form is properly filed, the presiding probate court will issue a CT Estate Tax Lien Release.  The estate’s representative should record this document on the land records in the town where the property is located.  At this point, the issue has been resolved, and the property is no longer encumbered by probate’s black cloud.

 

The probate process is not an easy obstacle course to navigate, and the negative emotions we experience following a loved one’s passing only strengthens that sentiment.  It is important to consult with a Probate Attorney to ensure the proper administration of your loved one’s estate, to avoid running into much larger problems down the road than most of us contemplated as possible.  Thank you for reading, and I hope you’re having a wonderful Summer!

 

-Attorney Bryan M. Etter

Wiley Etter, LLC