[WSBARP] Succession Tax, Inheritance Tax, Estate Tax

[Dwight Bickel]

In typical practice, the referenced exception appears only upon a preliminary commitment, and the exception is not allowed by the proposed purchaser that is not an heir, nor allowed by a proposed purchase-money mortgage lender, so it becomes a matter that the purchaser, or new lender's escrow instructions will require to be removed from the proposed policy. The seller (or its heirs and agents) will be required to pay taxes that are due, or otherwise convince the title company to assume the risk, so the exception is removed from the proposed policies. It is incredibly complicated for the title company to determine and to eliminate the risk of all possible succession taxes. That liability does not require recorded claims of lien. Often the seller's estate, the sellers' heirs or even the Estate's PR may be required to provide indemnity as a condition for the title company to assume that risk by removing that exception. It is probably not important to argue what the exception phrasing may mean when only the proposed Insured has rights under the policy, and that exception is not going to appear on the policy [unless it is an heir who is the Insured, and often that exception can be removed for that person's purchase-money mortgage lender].

While we know that the policy is interpreted by Courts favoring the interpretation by the proposed Insured, the intent of the title companies is to broadly except from the proposed policy coverage for any type of tax upon the Land that is due to the passing of the Title due to the death of a prior owner. In states with an Estate Tax, that exception would apply to the lien upon the Land due from the Decedent's Estate pursuant to both Federal and State tax laws. There are other taxes pursuant to statutes that the exception would apply to, such as DSHS rights to recover, even after the title of the Decedent expires due to joint tenancy or a life estate. Even "excise tax" due to the transfer caused by the death of the owner would be excepted, but in WA there is an exemption that applies. In states with an inheritance tax, that exception would also apply to any tax claimed to be due from the successor heir. There are circumstances where inheritance taxes are imposed upon Washington real property for its passing to an heir, imposed by other states where the decedent may have domiciled. The effect of such an exception would be that any subject assertion of a tax upon the purchaser due to the death of the prior owner would be an expense that would not be reimbursed by the Covered Risks of the Policy.

According to Succession Definition & Meaning - Merriam-Webster<https://www.merriam-webster.com/dictionary/succession>:
1 a: the order in which or the conditions under which one person after another succeeds<https://www.merriam-webster.com/dictionary/succeeds> to a property, dignity, title, or throne
...
2 a: the act or process of following in order : SEQUENCE<https://www.merriam-webster.com/dictionary/sequence>
b(1): the act or process of one person's taking the place of another in the enjoyment of or liability for rights or duties or both
(2): the act or process of a person's becoming beneficially entitled to a property or property interest of a deceased person
...

Dwight A. Bickel
Real Property Title Advisor
Washington Title Professional
Dwight at dwightbickel.com<mailto:Dwight at dwightbickel.com>
http://dwightbickel.com
206-484-1976

From: Eric Nelsen

But in real property transactions when an Estate is selling real property, I routinely see title companies refer to a "lien of succession tax." Whattheheck is a succession tax?

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20231204/f4721f1b/attachment.html>