CCA addresses federal tax liens on property transferred by beneficiary deed

Plain-English summary

Chief Counsel Advice addresses whether a federal tax lien under IRC § 6321 remains attached to property that passes at death by a beneficiary deed created under state law. The advice distinguishes survivorship property, where the decedent's interest may terminate automatically at death, from a beneficiary deed where the beneficiary has no property rights before death and the decedent can revoke or change the designation. On the facts presented, the federal tax lien remains attached to the property.

Ruling snapshot

• Question: Does a federal tax lien remain attached to property that passes by beneficiary deed when the owner dies without probate?
• Outcome: Advice given. The lien remains attached on the facts presented.
• Key authorities: IRC § 6321; Notice 2003-60, 2003 C.B. 643

Full text (IRS public release)

ID: CCA_2013052209132420
Office: -----------------------------
UILC: 6321.03-00
Number: 201323019
Release Date: 6/7/2013
From: ------------------
Sent: Wednesday, May 22, 2013 9:13:26 AM
To: ----------------------
Cc:
Subject: Decedent case question- no probate

You asked whether the federal tax lien under section 6321 would remain attached to property that
passes by a beneficiary deed (which is created by state statute). The section 6321 lien attaches to all of
decedent's property and right to property while the taxpayer lives. Generally, when property is owned by
the decedent and other party with rights of survivorship, the decedent's property rights terminate
automatically upon death. An example of this is when property is held as tenancy by the entireties. In the
tenancy by the entireties case, the property is held by spouses as a marital unit. If one spouse dies, then
the property is owned by the surviving spouse. (See Notice 2003-60, 2003 C.B. 643 which states with
respect to entireties property, that upon the death of the taxpayer there is no longer an interest held in the
property by the taxpayer to which a federal tax lien attaches). In contrast, the beneficiary here does not
hold property in common ownership with the decedent with rights of survivorship. Before death, the
decedent has the right to revoke or change the beneficiary deed and the beneficiary does not have rights
to the property before the taxpayer's death. Thus, the federal tax lien remains on the property.

Please let me know if you have any questions.

Thanks,