Heirs’ property ownership is a leading cause of wealth loss in many urban and rural Southeast U.S. communities including those estates subject to the Florida Laws of Intestate Succession. These laws apply when a property owner (decedent) dies without a Last Will or with a Last Will that does not comply with Florida law. In this case, the legal “heirs at law” of the decedent are those persons entitled to inherit decedent’s property. This typically includes the decedent’s surviving spouse and lineal descendants, i.e. birth children, adopted children and grandchildren. If there is no surviving spouse nor lineal descendants, legal heirs of the decedent may include collateral heirs related to decedent through a common ancestor, e.g. brother, sister, cousin, niece and nephew.
Part I of the Laws of Intestacy awards multiple heirs at law a fractional interest in decedent’s real property. As a result, heirs’ property is born because heirs at law become co-owners and cotenants of decedent’s real property. This raises questions about who will occupy the heirs’ property and who will pay expenses to maintain the property. Because heirs’ property owners do not enjoy rights of survivorship, if heirs die along the way, successive heirs at law inherit an even smaller fractional interest in title and the potential number of cotenants grows. Over time, family members of different generations can end up on title unwillingly and unknowingly. For this reason, title to heirs’ property is considered unstable since all cotenant heirs must be identified, notified and/or consent in order to mortgage, sell, improve, renovate or repair the property.
The Potential Problems Caused By Owning Heirs’ Property
The economic consequence of owning or selling heirs’ property is not wealth maximizing by any means. This is because heirs at law may be low-to-moderate-income earners and, if they lack understanding about real estate and do not have access to legal services, their interest in heirs’ property ends up in probate after they die or is eventually sold at a price well below fair market value. This may leave some heirs homeless after the sale and, because legal costs of sale are often paid out of closing proceeds, heirs receive far less than fair market value after sale of their fractional interest.
Inherited family member co-ownership of heirs’ property is wrought with potential problems. This is because each cotenant heir has a right to occupy and use the property, however, family member disputes often arise as to the property’s best use. Heirs often occupy the propety and elect not pay their share of the cost to maintain the property. To complicate matters further, before recent law changes, heirs would sell their fractional interest in the property to someone outside the family without notice or consent of other heirs. Because heirs may not be readily identifiable or aware of their ownership interest in heirs’ property, legal title to heirs’ property is clouded and may be difficult, costly and time consuming to clear title before the property can be sold.
The Disproportionate Effect of Heirs’ Property on Black Communities
Because of unfamiliarity of the law or unwillingness to pay legal fees to prepare and implement a Last Will, the detrimental economic effect of heirs’ property primarily impacts rural ethnic and racial communities of color. According to research estimates, heirs’ property with clouded title and unstable property ownership makes up more than 1/3rd of black-owned real estate in the Southeast United States. Due to the combined effect of inadequate estate planning and racial discrimination, 98% of heirs of Southern black landowners were either legally dispossessed from land ownership during the 20th century or jailed for refusing to leave heirs’ property after sale.
Because African American property owners disproportionately lack estate planning historically, their family real property interests often are splintered into unequal shares that are inherited by disinterested or estranged family members. This unplanned path to landownership often results in clouded titles, instability associated with multiple property owners, and potential forced sales by real estate investors. Conversely, those families with access to the resources that prepare a Last Will pass marketable title to their heirs and preserve equity in heirs’ property for future generations of their family.
Uniform Partition of Heirs’ Property Act Ratified to Protect Heirs at Law
To eliminate heirs’ property ownership problems that devalue real property and curb the loss of intergenerational wealth among vulnerable populations, Governor DeSantis signed into law the Uniform Partition of Heirs’ Property Act (Senate Bill No. 580) which took effect July 1, 2020. The goal of the UPHPA is to protect heirs’ property from predatory real estate practices used by real estate investors and developers who actively solicit heirs to sell (or force them into partition sale of) their fractional interests in heirs’ property well below fair market value. In the Governor’s words, the UPHPA will ‘level the playing field between speculators and families’ by ‘making a complicated process [for sale of heirs’ property] clearer and fairer’.
The biggest change UPHPA brings is providing statutory protection of heirs against the potential loss of equity that results from inadequate estate planning coupled with forced sale of heirs’ property. UPHPA will allow heirs’ property owners a chance to acquire the entire property before it can be sold to a non-family member third party, i.e. in effect a family member right of first refusal. Whether sold to a family member or non-family member, the property must be sold at an appraised fair market value and through a court supervised sale. For each of these reasons, legal heirs will have a better opportunity to preserve inherited equity in heirs’ property instead of gifting that benefit to real estate investors, developers and lawyers working actively to acquire heirs’ property at a discounted value through forced sale.
Potential Remedies to Avoid the Heirs’ Property Trap
The best way to bring awareness about the detrimental economic effect of heirs’ property ownership is through ongoing education and advocacy in the area of estate planning. The most effective way to proactively plan to avoid heirs’ property issues is implement a valid Last Will that avoids the laws of intestacy and transitions clean real property title to estate beneficiaries. While the newly enacted UPHPA will preserve heirs’ property equity and assure the property is not sold below fair market value, if heirs can work together, they can foster long-term co-ownership and investment in heirs’ property by the property to a Florida Land Trust implemented in accordance of the Florida Land Trust Act.
In order to alleviate the problems that heirs’ property can cause, it is advisable to create a family tree when a property owner dies to identify potential heirs, as well as, to determine whether heirs can come to agreement about how to use the property. If heirs’ property owners cannot agree to convey heirs’ property to trust in order to preserve family harmony or if the property cannot be partitioned in-kind (physically subdivided into shares for each heir), UPHPA allows for heirs to petition the court to sell the property to other heirs or otherwise place the property on the market for sale to the public. In either case, it may be advisable to order a title search report, perform a family genealogy search or initiate probate adminstration of the estate of a deceased heir in order to present clear and marketable title to the buyer at time of sale of heirs’ property pursuant to UPHPA provisions.
Contact Florida Probate, Trust and Estate Counsel Today
To further the goal of preserving equity in heirs’ property, it is of paramount importance to promote estate planning and preparation of Last Will and Testaments for owners of Florida real property. If you would like to schedule a telephone or ZOOM videoconference consultation with an experienced Fort Lauderdale probate and estate attorney to discuss heirs’ property issues further, please take a moment to complete the Firm’s Probate Intake Questionnaire and contact The Wealth Protection at (954) 332-2342 or by email (info@wealthprotection.us).
