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Probate and Property Laws Put Minority-Owned Real Estate at Risk

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The Heirs’ Property and the Racial Wealth Gap Conference hosted by Boston College Law School exposed the loss of minority-owned land and buildings to predators and brought together advocates working to help families preserve their generational wealth and legacies. “Heirs’ property” is the term of art for real estate that is passed down from generation to generation without the benefit of estate planning and probate.

The conference drew academics, lawyers, government employees, journalists, and advocates working to protect heirs’ property, many from the southeast. They explained that, in general, non-white and lower-income people are less likely to engage in estate planning than those who are white and higher-income. They are also less likely to go through the probate process to clarify ownership of property. Under every state’s laws, when property passes without a rule, called “intestacy,” the heirs inherit it as tenants in common. This means that when any them subsequently passes away, their share passes to their estate. Depending on the size of families, this can result in a dozen or more owners, with many having little or no connection to the property. The Wake Forest University Law School’s Heirs’ Property Project reports working with a more than 100-person family seeking to clear title to a large tract of farmland that their ancestors had lived on for nearly a century.

There are a lot of reasons people don’t engage in estate planning, including cost, fear of lawyers, avoidance of difficult decisions, reluctance to discuss death, and, in some cases, the simple unavailability of attorneys. One speaker pointed out that a number of rural counties in his state of North Carolina have about 10,000 residents and just two attorneys. Even if all they did was help families prepare estate plans, it could take a decade to complete them for every adult in the county.

The Risk

The failure to plan or probate estates often means the loss of properties due to tax foreclosure and partition actions. This often happens to Black and Hispanic-owned land both in the rural south and urban north. The tax foreclosures occur when no one feels responsible for the property or the people occupying can’t afford to pay the taxes and the other owners are unaware of the situation. In some states, such as Massachusetts, third-parties can swoop in, pay unpaid real estate taxes, and then force a sale of the property, often for less than fair market value.

Partition is the ability of any owner of property to force it’s sale, also often for less than fair market value. Predators research the ownership of heirs’ property, locate distant family members who might not even know they have an interest in the property, buy out their shares, and then force the sale of property long held in the family. This practice, as well as efforts to prevent it, are described in the documentary Gaining Ground: The Fight for Black Land, which was shown at the conference.

The conference moderator, Boston College Law Professor Thomas W. Mitchell estimates that $326 billion in generational wealth in Black family farms has already been lost.

Solutions, But It’s Complicated

Professor Mitchell has pioneered a uniform statute, the Uniform Partition of Heirs Property Act, that makes it more difficult to partition land by providing a series of due process protections, including notice, appraisal, and right of first refusal. So far, it has been adopted by 23 states and introduced in another six states, including Massachusetts.

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Clearing up title to heirs’ property can be difficult since it may well mean probating several estates, sometimes in more than one state, and locating and contacting distant relatives. And doing so can cut both ways in terms of protecting the property. While heirs’ property is at risk of foreclosure or partition, the lack of clear title can prevent a single owner from selling or mortgaging the property. Mortgages also can cut both ways. They permit access to equity that can enable owners to maintain and improve the property, but also can put the property at additional risk of foreclosure for nonpayment.

The same speaker from North Carolina who commented on the unavailability of trust and estates attorneys in some areas of the rural south counsels attorneys not to assume that clients or potential clients are making irrational decisions when they hold back from engaging in estate planning. They may well understand the implications and choose to have unclear title for its protective value.

Further, estate planning doesn’t always resolve the title issues. Wills that give property in equal shares to the next generation almost always create tenancies in common no different from those that occur when the owners die without wills. Children of the original owners will likely only have a fractional share themselves, making it impossible for them to plan for anything other than their ownership interest. In those cases, the entire extended family must work together to come up with a plan.

Trusts could be good solutions for families to maintain property for all members, but they usually involve more extensive and more expensive estate planing, so are rarely used for heirs’ property. One law school professor argued for making transfer on death deeds available in more states. These permit owners of property to pass it on simply by executing a new deed saying who should own it upon their deaths, similar to beneficiary designations on retirement and investment accounts. Transfer on death deeds are simpler than wills and trusts and avoid the cost and administrative burden of probate. And, unlike life estate deeds, during their lives the owners maintain total control of the property with the ability to sell or mortgage it or change who will receive it upon their deaths.

The issues and potential solutions are complex. Professor Mitchell estimates that $326 billion in generational wealth in Black family farms has already been lost. Fortunately, a lot of people are working to prevent further loss family property, in both rural and urban areas of the country.

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