Federal Tax Liens and Inheritances

If you own the IRS or Internal Revenue Service back taxes that you have be unable to pay or not paid, then the IRS can enforce a lien on all your assets and properties; these federal tax liens, once announced or made public, have a claim on all your properties. The lien can be extinguished only if you pay your full complete taxes, accruing interest, and all penalties to the IRS. After that, the IRS will release its lien on your property.

Disadvantages

When there is a Federal tax lien on your property such as real estate, you will not be able to sell it easily. Even though you are legally permitted to sell the property, the lien will then pass on to the buyer. As most potential buyers do not want to take on your debts, they will hesitate to purchase property with alien on it. One way out of this will be to discharge your debts to the IRS with the sale proceeds and get the lien removed. Otherwise, your property can only be sold for a fraction of the market rate.

Inheritances

Sometimes a person who owes back taxes to the IRS declares insolvency or bankruptcy. This is a situation in which the IRS declares a lien on the insolvent person’s property and assets. If such a person inherits property and other assets the lien automatically attaches to the newly-acquired property as well. Even if the insolvent person waives their right to the property so that it can be passed on to others, the lien on the property and assets stays.

Trust Funds

Some people start trust funds to ensure that spendthrift inheritors do not lose a steady monthly income. However, even such funds are not exempt from a federal tax lien on their assets. If the beneficiaries under the trust fund do not pay their dues to the IRS, the federal tax lien will automatically attach to the properties and assets of the trust fund.

Importance of Paying Taxes on Time

In order to escape all these adverse consequences, it is necessary for one to pay taxes due to the federal and state governments on time. Once the lien is notified, it will exist for a ten year period of time unless you are able to pay the back taxes, penalties, and accrued interest. This 10-year period is given to the IRS to enable it to collect taxes from you.

Retain a Lawyer

If you have been served a federal tax lien notice by the IRS, you need to take prompt action to get the lien removed. For this, you need to find the money to pay the taxes and retain a lawyer who can help speed up the process of removal of the lien. Otherwise, the lien will remain on your property preventing you from easily selling it or willing it to your near and dear ones.