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Understanding Inheritance Tax Liens On Real Estate

Ben Franklin wrote in 1789, “In this world, nothing is certain except death and taxes.” In Pennsylvania those two certainties come together to require a deceased person’s estate to pay an inheritance tax upon his or her death. That tax is then imposed as a lien upon any real estate by the descendent owned effective as of the date of death. This lien continues until the Pennsylvania Department of Revenue receives a payment of the tax, and issues an appraisement releasing the property from lien.

Because in many cases the tax is not paid, and the appraisement from Revenue is not issued, at the time the deceased person’s real estate is sold, the estate cannot deliver a deed to the buyer free of this lien. This is usually handled by the settlement agent escrowing from the seller estate’s proceeds a sum calculated as more than sufficient to pay the inheritance tax obligation which would be a lien upon the real estate being sold.

Although this fund is eventually released to the estate on the filing of the inheritance tax return and receipt of an appraisement from the Pennsylvania Department of Revenue, the procedure does cause a delay in receipt of some of the sale proceeds by the estate.

Being aware of this should avoid misunderstanding and allow the estate to plan the ultimate disbursement of estate assets to the estate heirs and beneficiaries.  If you have any questions with regard to this or other real estate settlement issues do not hesitate to contact the Real Estate team at Stock and Leader.

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