Deferred Property Taxes - Your Heirs May Be Liable - Even if They Don’t Get The House

Monday, October 3, 2016

    Under Oregon law, upon reaching a certain age, a home owner can often defer real estate taxes.

    There are limits to these deferrals.

    Even if you qualify for the deferral, and apply for this special treatment, the State of Oregon will charge 6 percent per year interest on all amounts deferred.  ORS 311.674(3).

    Such real estate tax deferrals can, therefore, be considerably more expensive than many people expect, and the charges plus interest can add up to a very significant sum over the years

    Of perhaps more importance, a new statute, an amendment to ORS 311.695, passed by the Oregon Legislature in 2015, allows the State of Oregon to sue your heirs and devisees for the amount of the deferred taxes (including interest).

    And the State reportedly can (and is) doing so, even if the heirs or devisees don’t actually get the house in question.

    Each and every heir and/or devisee can be held individually liable for the full amount due, because ORS 311.695 holds such people “jointly and severally liable.”

    While it might seem strange that an heir who gets nothing would be held liable for the unpaid taxes on the house he or she did not get, ORS 311.695 says that the “transferees” are jointly and severally liable.  ORS 311.666(10)(a) defines “transferee” as including the heirs, legatees, devisees, and distributees of a deceased person, and even the assignees or donees of an insolvent individual.

    One might think that it is obviously wrong to attempt to collect the deferred real estate taxes from a person who does not actually get the house on which the taxes were deferred.

    One might even think it was so obviously wrong, that the State would never try to do this.

    As of October, 2016, there are, however, several Oregon lawyers who are reporting that the State of Oregon is actually trying to collect such amounts.  

    In one case, the owner who deferred the taxes was losing the property to foreclosure, and died before the foreclosure was completed.  The heirs didn’t get the house.  But the State is still (as of October 3, 2016), reportedly taking the position that because the heirs “could have inherited it,” they are liable for the deferred taxes.