How to Get a Certificate of Discharge of Estate Tax Lien
Learn how to satisfy IRS requirements to remove a federal estate tax lien from property, a necessary step for executors to complete a sale or transfer.
When a person passes away, a federal estate tax lien automatically attaches to all property in their gross estate. This “silent lien” secures the payment of potential estate taxes and is valid without being publicly recorded. This can complicate the sale of property, as a buyer requires a clear title free from government claims.
To address this, an executor can obtain a Certificate of Discharge of Property from Federal Estate Tax Lien from the IRS. This document removes the lien from a specific piece of property, allowing it to be sold or transferred with a clean title. The certificate’s purpose is to facilitate a property transfer, not to prove the entire estate tax has been paid.
Conditions for Granting a Discharge
The IRS will issue a Certificate of Discharge only if specific conditions are met that protect the government’s interest in the tax revenue. One path to obtaining a discharge is when the estate tax liability has been fully paid. If the executor has filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and paid the entire tax due, the IRS can issue the discharge.
A discharge may also be granted if the IRS determines that the estate has no tax liability. This occurs when the gross estate’s value is below the federal exemption amount, meaning no Form 706 is required. In such cases, the IRS may issue Letter 1352, which confirms there is no filing requirement and serves to clear the property’s title.
Another scenario involves demonstrating that the government’s interest remains secure after releasing the property. The IRS may grant a discharge if the fair market value of the remaining property in the estate is at least double the amount of the total potential tax liability. This provides adequate collateral for the future payment of the tax.
Finally, a discharge can be secured if the proceeds from the property’s sale are used to pay the estate tax or are held in escrow. The executor agrees to deposit the net proceeds from the sale either directly with the IRS or into an approved escrow account. The funds are held as security until the final estate tax liability is determined and paid.
Required Information and Documentation for the Application
The request for a discharge is made using IRS Form 4422, Application for Certificate Discharging Property Subject to Estate Tax Lien. The executor must gather information about the decedent, including their full name, date of death, and Social Security Number.
Form 4422 requires a complete and accurate legal description of the property, exactly as it appears on the deed. The applicant must also state the property’s fair market value and provide the basis for that valuation, which is typically a professional appraisal.
A package of supporting documents must accompany the application. If the discharge request is related to a sale, the following documents are needed:
- A copy of the decedent’s will and any related trust documents.
- A copy of the Letters Testamentary, the court document that appoints the executor.
- A copy of the fully executed sale contract, detailing the buyers, purchase price, and terms.
- A draft of the proposed closing statement or settlement sheet showing the net proceeds.
- A copy of the filed Form 706, if available, or a draft of the return.
The Application Submission Process
The completed Form 4422 and all supporting documents must be submitted to the correct IRS office. All applications are processed by a centralized group and should be mailed to the IRS Advisory Consolidated Receipts in Florence, Kentucky. Send the package via a method that provides proof of delivery.
After submission, the executor should be prepared for a waiting period. The IRS states that applicants should submit the request at least 45 days before the transaction date to allow for processing time. The agency will review the application and attachments to verify that one of the conditions for discharge has been met.
If the application is approved, the IRS will issue the Certificate of Discharge and mail it to the executor. The process is not complete upon receipt of this certificate. To clear the property’s title, the executor must record the Certificate of Discharge with the local county recorder’s office or land registry where the property is located. This public filing serves as notice that the federal estate tax lien has been removed from that specific property.