Selling Real Estate of a Deceased Owner (Part 3)

In this third post of three I continue with the story of a call we received about an unmarried couple who owned real estate together.  The woman passed away first and a year later the man died.  As I explained last week, the administrator of the man’s estate found a buyer for the home fairly quickly, however, I expected that I would need to work with both real estate attorneys and the buyer’s title insurance company to get the sale to close.

That’s because the title company wants to be sure there aren’t any liens for unpaid inheritance taxes before it agrees to insure the title to the property against all outside interests.  While we were able to quickly file an inheritance tax return and pay the tax with respect to the 1/2 interest the woman left to the man, it takes at least a few months for the State to process the return and issue a tax waiver releasing the lien it automatically has by law on New Jersey property.

The man’s return would be more involved since he left all his assets to his siblings who are Class C beneficiaries.  In this case the tax would be 11% on amounts each sibling receives above the first $25,000 (which is exempt from the tax).  We need date of death balances for all assets and there are certain allowable deductions that reduce the tax.  Completing the return would take time so we would not have the tax waiver releasing the tax lien for the man’s estate until months after the parties wanted to close.  

Additional pressure came from the buyers who were borrowing money to help them pay the purchase price.  They had locked in an interest rate that had an expiration date which they did not want to lose.

We have seen this scenario many times in our office.  It is necessary to negotiate a resolution with the title company which they are comfortable with so they willl issue the title policy which is one of the requirements of the bank that will provide the loan secured by a mortgage.  As I said, we filed the return and paid the tax for the woman’s estate.  We then also made an estimated payment of tax for the man’s estate.  I presented this proof to the title company. 

They required an additional amount to be held in escrow for both estates’ inheritance taxes just as an added cushion and the executor deed signed by the woman’s estate executor transferring her 50% interest to the estate of the man.  Once our client agreed to this the title company and the bank both gave their approval and the sale closed.  Once we get the tax waivers back from the State of New Jersey and present them to the title company, it will release the escrowed funds to the executor of the man’s estate.  Mission accomplished.