What to Do if a Lien Holder Dies

A lien is an asset to the person or business that holds it, and it usually represents a right to take or hold a property that can be sold for payment. When the lien holder dies, the lien is transferred along with other assets to his heirs. If a specific heir is not designated, the lien will transfer to the deceased person’s estate. The lien does not disappear upon the lien holder’s death.

A lien holder has a charge or claim on a type of property for payment of a debt or performance of a duty or obligation. The property might be a vehicle, a piece of land or performance of work on a property, such as construction. Liens are usually created by parties reaching an agreement. A lien may also result from certain common laws or statutes, such as a builder’s or contractor’s lien, or a state or federal tax lien.

Certain laws allow lien holder rights to pass to a person's estate in case of his death, or to a trustee in case of bankruptcy. This would apply in the case of a lien holder as an individual. To have a lien released when the lien holder has died, the lien must be satisfied. The person who satisfied the lien must obtain a lien release from the deceased person’s estate or the person to whom the lien had been passed. The law also allows a lien to be assigned by the lien holder to another individual. Because the lien represents income or some other asset to the lien holder, it is likely the estate or current lien holder will contact the person who needs to satisfy the lien.

In many cases, a lien holder is a large company such as a mortgage bank or auto financing company. If these companies fail, their loans and other assets would be sold to other companies, so liens would remain in place. The person who needs to satisfy the lien would need to work with the company that becomes the new lien holder.

If a current lien holder cannot be located, consider that some liens expire after a certain period of time. For example, a contractor’s lien expires after an eight-month period. The contractor must file a lawsuit in the county’s Superior Court to enforce his interest in the lien. IRS liens expire after a 10-year collection period has ended.