Heirs’ Property - A Serious Problem Not Enough People Are Talking About

Heirs’ Property is a term that refers to a home or land that passes from generation to generation, without a will, often over generations. Heirs' property is a serious problem that not enough people are talking about. In this article, we shed light on this important topic.
Read the Full Story

Heirs’ Property - A Serious Problem Not Enough People Are Talking About

Heirs’ Property is a term that refers to a home or land that passes from generation to generation, without a will, often over generations. Heirs' property is a serious problem that not enough people are talking about. In this article, we shed light on this important topic.
What is Heirs’ Property? 

Heirs’ Property is term that refers to a home or land that passes from generation to generation, without a will, often over generations. This land frequently ends up being owned by an exponential number of remote descendants, each having fractional interests in the land, all without clear title. There is no clear title because no estate administration work has ever been done to ensure that the rightful owners, i.e. the next generation, have legal title to the land.  

Without clear title, these descendant landowners face a number of serious problems including forced sales, forfeitures, and evictions. 

 

The Mechanics of Heirs’ Property

Each heir has an equal degree of ownership. This means that each heir has an equal right to full use (for instance, if there are 75 heirs with each owning 1/75th of the home, all 75 will have the right to live in the home). The heir who pays the taxes and lives on the property does NOT have superior ownership to the others.

Each heir may freely transfer his or her interest in the land to another co-owner, or, to a third party unrelated to the family. In many cases, once a third party with means becomes a co-owner (for example, a real estate developer, has bought even a tiny fractional interest in in the land from one of the more loosely connected heirs), they can petition the court to bring about a partition and force a sale, through the courts, of the entire plot, often at well below fair market value. At this juncture, the cost barrier for the remaining heirs to properly administer the estates of their ancestor owners to clear title is simply too great, and the land is lost. 

Four Reasons Heirs’ Property is a Major Problem:
  1. Heirs’ Property disproportionately affects Black Americans.  

The U.S. Department of Agriculture has recognized it as “the leading cause of Black involuntary land loss.”  Currently, heirs’ property is estimated to make up more than 1/3 of Black-owned land in the south — 3.5 million acres, worth more than $28 billion, which is a fraction of the heirs’ property that has already been lost. 

Why is this the case? Black Americans have been routinely denied access to the legal system throughout history, particularly in the south. Naturally, many families did not trust the legal systems in their area, and much of their land was passed from generation to generation without a written will and without having done formal estate administrations for any of the estates of the previous generations – which led to widespread unclear title. 

One stark statistic about heirs’ property that illustrates the pervasiveness of this problem is that by 1910, after the Civil War, up to 15M acres of land was acquired and owned by Black families and only a mere fraction, 3.5M acres, remains in those families. 

  1. Heirs’ Property limits a family’s ability to pass wealth down from generation to generation.

Between 1910 and 1997, Black families lost about 90% of their farmland, a loss equivalent to hundreds of billions of dollars. 

Heirs’ property landowners are vulnerable to laws and loopholes that allow speculators and developers to acquire their property. Black families watch, with limited ability to fight back, as their land is auctioned on courthouse steps or forced into a sale against their will.

One of the most discussed problems of heirs’ property ownership is partition sales. Here is an example of how a partition sale can exploit generational wealth: 

Let’s say, for instance, a land developer finds land in Georgia that he or she wants to purchase, reviews the chain of title, and determines that it is heirs’ property.  The developer does a search, and locates and contacts 1 heir, who happens to live in New York, and has little to no idea that he or she owns 1/120th of a parcel of land in Georgia, and does not know any of his or her relatives there.  The developer offers to purchase that 1/120th interest in the land for what seems like a great price, and the heir accepts. As the new owner of this 1/120th interest, the developer can now petition the courts in Georgia to force the property to a sale for well below fair market value - which isn’t usually too difficult to do, particularly if the heir landowners have been delinquent in paying property taxes or he property is seemingly a blight on the area. Often, the heirs have been unable to produce value from the land due to ineligibility for USDA programs and cannot afford to counteroffer or conduct the estate administrations needed to clear title. 

  1. Heirs’ Property hampers the efforts of descendants to revitalize properties to build familial wealth. 

As discussed, other than with respect to selling one’s fractional interest, all fractional owners of heirs’ property have to agree and consent to mortgaging, selling, or renting out the entire property. Even if the occupants and those closely involved with the property agree, some heirs may be difficult to locate to obtain the necessary consent. Banks and mortgage companies don’t typically accept fractional interests in property as sufficient collateral to secure a loan or mortgage, and title companies need clear title to typically effectuate a sale.  Heirs’ property is not considered clear until all heirs consent to the sale. This also becomes problematic if one heir wants to buy out the other heirs but cannot secure the funds because of the reluctance by banks and mortgage companies to accept a fractional interest in land as security.

  1. Heirs’ Property limits the ability of its occupants to receive government disaster relief or participate in land improvement programs. 

After a natural disaster, occupants of heirs' property are often unable and ineligible to get government financial assistance.  After Hurricane Katrina, 25,000 families who applied for rebuilding grants had heirs’ property and some estimate that up to $165 million of recovery funds for Katrina were never claimed because of title issues. The good news is that last year, FEMA finally created a loophole that will now allow occupants to “self certify” their ownership in order to receive relief. FEMA will also accept letters from local officials and bills for home repairs as proof of ownership. However, there are many other public and semi-public programs that need to catch up, particularly, many state and federal land improvement programs, where eligibility may hinge on clear title. 

 

New Developments and Solutions on the Horizon

Families with heirs’ property can now receive a “farm number” through the FSA in order to access certain USDA programs.

Prior to 2018, when the 2018 Farm Bill passed, it was impossible for owners of heirs’ property to obtain a farm number through the USDA. A farm number is required to be eligible for many different USDA programs, including lending, disaster relief programs, and participation in county committees.

Luckily, the 2018 Farm Bill authorized alternative documentation for heirs’ property operators to establish a farm number.

Families with heirs’ property can now access capital to clear title and/or buy out other fractional heirs. 

The Farm Bill also authorized the Heirs' Property Relending Program. The re-lending program will provide loan funds to eligible lenders to resolve ownership and succession on farmland with multiple owners. Heirs can apply for up to $600,000 directly to these USDA authorized lenders for loans and assistance in clearing title.

Eligible heirs must: 

  • Be individuals or legal entities with authority to incur the debt and to resolve ownership and succession of a farm owned by multiple owners; 
  • Be a family member or heir-at-law related by blood or marriage to the previous owner of the property;  
  • Agree to complete a succession plan. 

The funds may be used to resolve title issues by financing the purchase or consolidation of property interests and financing costs associated with a succession plan. This may also include costs of buying out fractional interests of other heirs to clear the title, which includes closing costs, appraisals, title searches, surveys, preparing documents, mediation, and legal services.   

There are many nonprofit organizations and pro bono legal services groups that can help families resolve their heirs’ property problems.  

In fact, many of the larger legal nonprofit organizations actually have an entire division or department dedicated to assisting in these matters. Please see a list of some, below:

Read the Full Story

Heirs’ Property - A Serious Problem Not Enough People Are Talking About

Heirs’ Property is a term that refers to a home or land that passes from generation to generation, without a will, often over generations. Heirs' property is a serious problem that not enough people are talking about. In this article, we shed light on this important topic.
Read the Full Story
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Heirs’ Property - A Serious Problem Not Enough People Are Talking About

The Trustate Team
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What is Heirs’ Property? 

Heirs’ Property is term that refers to a home or land that passes from generation to generation, without a will, often over generations. This land frequently ends up being owned by an exponential number of remote descendants, each having fractional interests in the land, all without clear title. There is no clear title because no estate administration work has ever been done to ensure that the rightful owners, i.e. the next generation, have legal title to the land.  

Without clear title, these descendant landowners face a number of serious problems including forced sales, forfeitures, and evictions. 

 

The Mechanics of Heirs’ Property

Each heir has an equal degree of ownership. This means that each heir has an equal right to full use (for instance, if there are 75 heirs with each owning 1/75th of the home, all 75 will have the right to live in the home). The heir who pays the taxes and lives on the property does NOT have superior ownership to the others.

Each heir may freely transfer his or her interest in the land to another co-owner, or, to a third party unrelated to the family. In many cases, once a third party with means becomes a co-owner (for example, a real estate developer, has bought even a tiny fractional interest in in the land from one of the more loosely connected heirs), they can petition the court to bring about a partition and force a sale, through the courts, of the entire plot, often at well below fair market value. At this juncture, the cost barrier for the remaining heirs to properly administer the estates of their ancestor owners to clear title is simply too great, and the land is lost. 

Four Reasons Heirs’ Property is a Major Problem:
  1. Heirs’ Property disproportionately affects Black Americans.  

The U.S. Department of Agriculture has recognized it as “the leading cause of Black involuntary land loss.”  Currently, heirs’ property is estimated to make up more than 1/3 of Black-owned land in the south — 3.5 million acres, worth more than $28 billion, which is a fraction of the heirs’ property that has already been lost. 

Why is this the case? Black Americans have been routinely denied access to the legal system throughout history, particularly in the south. Naturally, many families did not trust the legal systems in their area, and much of their land was passed from generation to generation without a written will and without having done formal estate administrations for any of the estates of the previous generations – which led to widespread unclear title. 

One stark statistic about heirs’ property that illustrates the pervasiveness of this problem is that by 1910, after the Civil War, up to 15M acres of land was acquired and owned by Black families and only a mere fraction, 3.5M acres, remains in those families. 

  1. Heirs’ Property limits a family’s ability to pass wealth down from generation to generation.

Between 1910 and 1997, Black families lost about 90% of their farmland, a loss equivalent to hundreds of billions of dollars. 

Heirs’ property landowners are vulnerable to laws and loopholes that allow speculators and developers to acquire their property. Black families watch, with limited ability to fight back, as their land is auctioned on courthouse steps or forced into a sale against their will.

One of the most discussed problems of heirs’ property ownership is partition sales. Here is an example of how a partition sale can exploit generational wealth: 

Let’s say, for instance, a land developer finds land in Georgia that he or she wants to purchase, reviews the chain of title, and determines that it is heirs’ property.  The developer does a search, and locates and contacts 1 heir, who happens to live in New York, and has little to no idea that he or she owns 1/120th of a parcel of land in Georgia, and does not know any of his or her relatives there.  The developer offers to purchase that 1/120th interest in the land for what seems like a great price, and the heir accepts. As the new owner of this 1/120th interest, the developer can now petition the courts in Georgia to force the property to a sale for well below fair market value - which isn’t usually too difficult to do, particularly if the heir landowners have been delinquent in paying property taxes or he property is seemingly a blight on the area. Often, the heirs have been unable to produce value from the land due to ineligibility for USDA programs and cannot afford to counteroffer or conduct the estate administrations needed to clear title. 

  1. Heirs’ Property hampers the efforts of descendants to revitalize properties to build familial wealth. 

As discussed, other than with respect to selling one’s fractional interest, all fractional owners of heirs’ property have to agree and consent to mortgaging, selling, or renting out the entire property. Even if the occupants and those closely involved with the property agree, some heirs may be difficult to locate to obtain the necessary consent. Banks and mortgage companies don’t typically accept fractional interests in property as sufficient collateral to secure a loan or mortgage, and title companies need clear title to typically effectuate a sale.  Heirs’ property is not considered clear until all heirs consent to the sale. This also becomes problematic if one heir wants to buy out the other heirs but cannot secure the funds because of the reluctance by banks and mortgage companies to accept a fractional interest in land as security.

  1. Heirs’ Property limits the ability of its occupants to receive government disaster relief or participate in land improvement programs. 

After a natural disaster, occupants of heirs' property are often unable and ineligible to get government financial assistance.  After Hurricane Katrina, 25,000 families who applied for rebuilding grants had heirs’ property and some estimate that up to $165 million of recovery funds for Katrina were never claimed because of title issues. The good news is that last year, FEMA finally created a loophole that will now allow occupants to “self certify” their ownership in order to receive relief. FEMA will also accept letters from local officials and bills for home repairs as proof of ownership. However, there are many other public and semi-public programs that need to catch up, particularly, many state and federal land improvement programs, where eligibility may hinge on clear title. 

 

New Developments and Solutions on the Horizon

Families with heirs’ property can now receive a “farm number” through the FSA in order to access certain USDA programs.

Prior to 2018, when the 2018 Farm Bill passed, it was impossible for owners of heirs’ property to obtain a farm number through the USDA. A farm number is required to be eligible for many different USDA programs, including lending, disaster relief programs, and participation in county committees.

Luckily, the 2018 Farm Bill authorized alternative documentation for heirs’ property operators to establish a farm number.

Families with heirs’ property can now access capital to clear title and/or buy out other fractional heirs. 

The Farm Bill also authorized the Heirs' Property Relending Program. The re-lending program will provide loan funds to eligible lenders to resolve ownership and succession on farmland with multiple owners. Heirs can apply for up to $600,000 directly to these USDA authorized lenders for loans and assistance in clearing title.

Eligible heirs must: 

  • Be individuals or legal entities with authority to incur the debt and to resolve ownership and succession of a farm owned by multiple owners; 
  • Be a family member or heir-at-law related by blood or marriage to the previous owner of the property;  
  • Agree to complete a succession plan. 

The funds may be used to resolve title issues by financing the purchase or consolidation of property interests and financing costs associated with a succession plan. This may also include costs of buying out fractional interests of other heirs to clear the title, which includes closing costs, appraisals, title searches, surveys, preparing documents, mediation, and legal services.   

There are many nonprofit organizations and pro bono legal services groups that can help families resolve their heirs’ property problems.  

In fact, many of the larger legal nonprofit organizations actually have an entire division or department dedicated to assisting in these matters. Please see a list of some, below:

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