At first glance, inheriting a home or real estate might sound like a turn of good fortune. But if it is considered “heirs’ property,” you might be left dealing with a lingering – and costly – legal issue.
Heirs’ property is created when someone dies without a will or estate (known as “intestate”) and their property is distributed to family members by inheritance. These family members now all have an ownership interest in the property. This can create several financial and legal hurdles. For example, in order to get a clean title for the home, you may need to go through probate which can take quite a while, potentially cost a lot and lead to property loss. Without a clear title the home cannot be sold, and heirs can’t access the equity.
A Heads Up for Homeowners
So if you own real estate, how do you avoid an heirs’ property situation? Molly Anderson of Howes & Anderson, P.C., a long-time ARAG network attorney, suggests the first thing anyone should do is simple: review the deed showing title to the property.
Anderson adds, “It’s not enough to check the County Assessor page; it is strongly recommended you review the deed conveying title because that will show you who actually owns the property and how the land is titled. You may be surprised to learn that the title to the real estate is solely in one spouse’s name; or that you actually only own a fractional interest in a property, rather than the whole interest you thought.”
Anderson points out that if you discover the title in your real estate is incorrect, the best way to solve that problem is to consult an attorney who handles real estate or estate planning. She adds, “If, for instance, you discover that you need to add the other spouse’s name to the title of the real estate, an attorney can easily prepare a quit claim deed to correct that issue for little cost. However, if you discover a more complicated problem with the title to the real estate, it is critically important to have an attorney assist you.”
Anderson notes that real estate is often the reason that a person’s estate must go through probate after death. She contends, “The best way to avoid that expense for your heirs is to work with an attorney to create an estate plan that retitles any real estate into a revocable trust. Preparing a revocable trust requires you to undergo some work and expense now, but the savings you pass onto your loved ones are considerable. Fees in probate are generally 2% of the gross value of your assets to attorney fees and then additional court costs, which can add up very quickly when real estate is involved.”
What to do if you inherit heirs’ property?
Keep in mind that even if the person who died had a will, they may still create heirs’ property by leaving it to multiple people. Also, note that heirs’ property is often subject to “tenancy in common,” where owners as tenants share interests and privileges in all areas of the property. Being tenants in common may affect decisions that need to be made regarding the property, such as maintaining it, paying utilities and property taxes on it, and even selling it. Additionally, there may be liens against the property, or tax considerations. It is a good idea for an heir to consult with a CPA or tax specialist (in addition to an estate planning attorney) to avoid any surprises that can come with inheriting a property.
Another tricky aspect of inheriting property is if you were to discover after your spouse dies that your name was not on the title to a piece of real estate. You would likely need to go through probate to get the title to the property in your name. This is expensive, time-consuming and could be completely avoided if you check the title while your spouse is alive.
Anderson notes the best way to avoid future problems is to take action and get the legal assistance you need now, while you are mentally competent and have time to correct issues. She adds, “It’s always easier to solve legal problems now, while you are alive, rather than leave issues your heirs must address after your death.”
Keep in mind that ARAG legal plan members have access to experienced network attorneys to help create and review legal documents related to estate planning. If you run into a bump along the way, they can also provide legal counsel and representation.
