WHAT HAPPENS TO REAL PROPERTY WHEN SOMEONE DIES WITHOUT A WILL? When a person passes away without a will, their property passes according to intestacy laws. In most cases, a person’s spouse and children inherit from them. A surviving spouse’s share depends on the number of children the decedent (the person who died) had and ranges anywhere from 1/3 to the entire interest in real property. The remainder of the estate is then divided among each of the decedent’s children in equal shares.
HOW CAN HEIRS SELL THE REAL PROPERTY THEY INHERITED? It should go without saying that if a decedent died testate (with a will), the will should be probated. Once the Notice to Creditors has been run at least once, the heirs under that will are free to sell the property. If the estate is still open at the time of sale, the Executor will be required to sign any conveyance documents along with all of the heirs, and their spouses, if any. If the decedent passed away intestate (without a will) within the last two years, the heirs will be unable to sell the property without opening a probate estate for the decedent. The reason for this is that the title company who would be insuring the transaction would want to know that (1) all potential heirs have notice of the decedent’s death and that they may have an interest in the decedent’s estate, (2) the decedent’s creditors have had an opportunity to file a claim against the estate for any sums the decedent may have owed them, and (3) that the estate is exempt from federal estate taxes or that all estate taxes have been paid. If the intestate decedent passed away more than 2 years ago, the heirs are free to sell the property without opening a probate estate. However, in lieu of a probate estate, the title insurance company will require Affidavits of Heirship from two disinterested parties who are familiar with the decedent. These affidavits are recorded in the public record to evidence that the heirs are the only parties who would have inherited from the decedent. In other words, there are no children or spouse whose interests are being overlooked in the anticipated transaction. All parties with an interest in the real property, whether under a will or by intestacy, will be required to sign any legal documents pertaining to the sale or financing of the property. These heirs are considered tenants in common with respect to each other. This means that they each have a fractional interest in the whole of the property. Say, for example, 4 heirs inherited 8 acres. As tenants in common, they do not each own 2 acres. Rather, the 4 heirs each own ¼ interest in all 8 acres. For this reason, sale of the property would require the consent of all 4 heirs. While legally an heir could convey his ¼ interest to someone, that Buyer would only have ¼ interest and would not be free to use the property as his sole property.
COMMON PROBLEMS WITH INHERITED REAL PROPERTY There are a number of scenarios in which heirs may find it difficult to sell an inherited property. Let’s look at a few examples.
- Legal vs. Actual Interest. One heir may pay the property taxes for years and years, maintain the property, or even live on the property, without the help of the other heirs. When that heir wants to sell the property, they often believe that the other heirs no longer have an “interest” because they were not paying taxes or helping to maintain the property. Legal/ownership interest is not the same thing as actual interest. An heir does not lose their ownership interest simply because they have not tended to the property or because they have no actual interest in owning or maintaining property. Anyone with an ownership interest in the property will be required to sign off on any conveyance.
- Subdivision of the Inherited Land. This subject was touched on briefly, earlier. To use the same example, if 4 heirs inherited 8 acres, can the heirs simply agree that each person gets 2 acres? Certainly they can make such an agreement amongst themselves, but in order for it to be legally enforceable, the following would be required:
- Unless the parcel is already subdivided into 2-acre parcels (for example, the heirs own four different 2-acre lots in a subdivision), a survey may be required to define the boundaries of each 2-acre sub-parcel.
- All four heirs should deed each 2-acre parcel to the intended heir. John, Mary, Peter, and Anne should all deed 2 acres to John. Likewise, they should all deed 2 acres to Mary, 2 acres to Peter, and 2 acres to Anne. Upon doing this, each heir would then have 100% ownership interest in his/her own 2-acre parcel and would no longer have any ownership interest in the other 6 acres.
- An Heir Passes Away. Another common problem is when ownership interest in a property is divided among several heirs and then one or more of those heirs passes away. If, from the earlier example, John passed away, his interest in the property is not extinguished. It does not pass to Mary, Peter and Anne. In fact, it passes to John’s heirs, usually his spouse and children. Now, any conveyance of the inherited property would require the signatures of the surviving heirs, Mary, Peter, and Anne, as well as John’s heirs. Note that if John died without a will, the same intestacy procedure outlined above would apply (less than two years, an estate must be probated; more than two years, heirship affidavits are required).
To complicate things further, let’s say, for example, John passed away and his wife, Amy, and his 2 adult children, Michael and Sarah, inherited his interest. Thereafter, Sarah passed away leaving her husband, Jim. Now, any conveyance of the property would require signatures from Mary, Peter, Anne, John’s wife, Amy, John’s son, Michael, and John’s daughter, Sarah’s, husband, Jim. As you can imagine, in instances where a property has been in the family for decades, the more descendants of the original owner that pass away, the more complicated it becomes to determine ownership interest in the property and the more people who would be needed to sign off on any conveyance. Heirs of a decedent’s estate can avoid this scenario by deciding early on what to do with the inherited property and either selling it or legally subdividing it among the heirs.
- Heirs Disagree. All of the heirs may not agree on what to do with the real property they inherited. Some may want to keep the property while others want to sell the property to realize the cash value of their interest. If an heir holds out and does not want to sell and does not buy out the interest of the remaining heirs, a partition action may be necessary, in which the court could force the sale of the property.
If all of this has you thoroughly confused, you’re not alone. Our firm is here to help walk you through the process and clear up these types of title issues so that you, as an heir, can sell your inherited property. Give us a call and we will be happy to discuss with you to decide the best course of action.