When a person dies, the State of Connecticut assesses a probate court fee based on the value of all property the decedent owned at death. Due to the budget crisis in Connecticut, the Connecticut General Assembly stopped funding the probate court system from general revenues. To help the probate courts become self-supporting, the legislature passed Public Act 15-5. This new law creates an inchoate lien to ensure payment of probate court fees. A lien is an encumbrance on real estate that a seller must pay before the sale of the real estate. Some liens are inchoate which means that there is no record of them on the land records of the town where the real estate is located. Only state and federal governments can create inchoate liens.
Effective July 1, 2015, the new lien applies to unpaid probate court fees including .5% per month interest on those fees from the date they are due (30 days after 6 months from death) to the date they are paid. This new inchoate lien is in addition to the lien for Connecticut estate taxes. To remove the probate court fee lien from a decedent’s real estate, the person in charge of probating the estate (i.e. – the Executor or Administrator) must file on the town land records a Certificate releasing the probate fee lien. The Probate Court handling the decedent’s estate issues the Certificate.
Let’s look at an example. Say your father dies in Montville, Connecticut, and you are appointed Executor based on his Will. You timely file his Connecticut estate tax return within 6 months of his death. You list his life insurance, brokerage accounts, his Montville home, bank accounts and IRAs on the return. The Court issues a Certificate releasing the probate court fee lien on his home and you file it in the Montville land records. You file a Financial Report and an Affidavit of Closing. You’re done.
But let’s say that your father had bought a lot next door to his Montville home and you did not find the deed until one year after his estate was closed. You list the lot for sale and you have a buyer. The real estate attorney representing the buyer hires a title searcher who searches the Montville land records. The searcher finds that there is a Certificate releasing the probate court lien on your father’s home but not on the lot that you are now trying to sell. The buyer’s real estate attorney notifies your attorney that you do not have good title to the lot because the new inchoate lien for probate fees has not been released.
How do you fix this problem? Unfortunately, it’s not a simple process. Your attorney tells you that you must reopen your father’s estate, amend the Connecticut estate tax return, pay more probate court fees based on the value of the lot, file a new Financial Report, and obtain the Certificate releasing the probate court fee lien. You ask how much it will cost in additional legal fees and probate court fees and the answer makes you wonder whether it is worth selling the lot. Probate fees range from 1% to .05% of the gross estate. For a lot that sells for $100,000, you would pay $465 in additional probate court fees.
Your attorney estimates that it will take 30 days to complete all of those tasks in Probate Court. You complain that you will lose the buyer with that sort of delay. But the attorney says that the Probate Court will issue a Certificate releasing the probate fee lien if payment is reasonably assured. If the attorney sends a letter to the Probate Court that he will disburse the probate fees from the proceeds of the sale of real estate, payment is reasonably assured. Given the net proceeds you will receive from selling lot, you approve your attorney reopening the estate to obtain the Certificate releasing the lien for probate court fees on the lot.
As you can see from this example, the new probate court fee lien can be a big “Gotcha!” in the sale of real estate. The new probate court fee lien may become an ugly surprise for families who do probate on their own without consulting a probate attorney. They may save a few thousand dollars in the short term only to waste time and money in the long run. Real estate closing attorneys must add the clearing of this lien to their closing checklists when the owner of the real estate has died.
For more on the calculation of probate court fees, see our blog New Fee Schedule Removes Cap on Probate Court Fees.
