I realize family trust is a generic term. I won’t have the specifics until I get a copy of the trust from the trustee. The successor trustee has agreed to sell me the property subject to the state tax liens he believes are attached to the property in the trust.
By the way, this is a foreclosure case in Wisconsin. The foreclosing lender has not enjoined the state in the foreclosure suit and doesn’t believe that the liens are encumbering the property.
The “family trust” was established prior to the purchase of the subject property and prior to the filing of the tax liens against the family member(s).
I appreciate your comments and will post the specifics after I review the actual trust documents.
Can a tax lien, state or federal, be enforced against real estate held in a Family Trust? The trust was formed and the real estate was purchased by the trust prior to the tax liens and the liens are against individual family members, not the Family Trust. Thanks
Local RE taxes on RE, not people - Posted by John Merchant
Posted by John Merchant on February 25, 2008 at 10:38:16:
City, county and state taxes are levied on the RE, not on its owners.
As such, once they’re levied and taxes go unpaid, those liens attach automatically by force of your local state’s laws.
Regardless of who owns the RE and whether it’s Bill Jones or a trust, LLC, etc. the taxes attach to the RE and have to be paid when that RE is legally conveyed.
“family trust” can mean a number of very different things.
if you are talking about a revocable inter-vivos trust (aka “living trust”), and the grantor of that trust is still alive, and the lien is against that grantor, a taxing jurisdiction CAN DEFINITELY stick a lien on trust property. this kind of trust is a “non-entity” for tax purposes, and for a lot of other purposes, too.
but if this trust was irrevocable from the get-go, and established for the benefit of people other than the grantor, its much harder to get a lien to stick. if the tax cheat is a beneficiacy, the lien can’t stick to the trust property. if the tax cheat is the grantor, the analysis is trickier. if the grantor divested humself of assets to make himself judgment-proof or insolvent, a creditor can get the transfer of assets disregarded. Every state has rules in this regard.
if this was previously a revocable trust, and now is partially or wholly irrevocable because of the death or incapacity of the grantor---->the deal is trickier still. I won’t address this one unless you tell me its an accurate picture.
the trust was set up as irrevocable and the grantor was not a beneficiary. the tax liens were entered several years after the formation of the trust, which makes the liens more than 10 years old.
the title company listed the federal tax liens on the title report even though they are 10+ yrs old.
After doing all my research, I physically went to my local IRS office today. They confirmed that if the liens are more than 10 years old and have not been re-filed, they are uncollectable by the IRS.
I have purchased more than 100 foreclosures and distressed properties since 2003 and I have dealt with the IRS many, many times. I’m fairly confident that they cannot collect on these liens.
What boggles my mind is a Real Estate Law Firm and a Title Company can so completly miss the boat.