Who Pays the Lien? Protecting Your Heirs from Surprises in Estate Planning by Kurt R. Bachman

What does the law say about how liens and expenses get paid, and by whom, for specific devises of any real or personal property as well as for real estate transferred by T.O.D. deed at death?

This question points out a very relevant topic which can pit the heirs of one class against the heirs of another. For instance, if you are the residuary beneficiary in a Last Will & Testament (“Will”) of a decedent where the decedent’s Will requires the payment of expenses of administration from the residuary, you may receive nothing from the estate because those expenses must generally be paid first. Only what remains gets paid to the residuary beneficiary. As such, consider the fact that a specific beneficiary in the Will is to receive a specific devises of real or personal property, but that property contains a mortgage or lien, and the Will requires the payment of mortgages and liens from the residuary. Such mortgage or lien must generally be paid from the residuary beneficiary’s share and the specific beneficiary of the real or personal property receives the same free of the mortgage or lien because Indiana law (I.C. 29-1-17-9) says that specific devises are subject to the lien unless the Will specifically or by implication states the lien is to be paid off. The statute also says that a general directive “to pay debts” does not imply payment of lien. A client who wants the lien paid as part of the specific devise instead of the residuary may ensure this result by checking the language in their Will to be certain it is properly directing the Personal representative to do so. These same rules also generally apply to real estate transferred by T.O.D. deed at death.