Accessing and Retaining Wealth
with Heirs’ Property

Partition is a legal action taken to divide a property between all living heirs. The process gives heirs the opportunity to pay other cotenants for their share of the property if they do not want to continue ownership, or it divides the property physically so that each heir has their own smaller parcel. Any heir can begin the partition process without permission from the other heirs, and may force the sale of the property in court if they do not accept the other heirs’ offers to buy them out or subdivide the land. 

If a land speculator, developer, or other individual buys a share in the property from one of the heirs, they can also force a partition sale. Many partition sales result in the property sold at auction, for far less than it is worth. Speculators have used this method to acquire property from families for a low price, by forcing a sale and purchasing the entire property at auction.

Stronger federal and state policies are needed to better support heirs’ property owners. Policy efforts can focus on:

•  Prevention and protection: Reduce the creation of heirs’ property and protect existing heirs’ property owners.
•  Simplifying inheritance: Make it easier to transfer property and clear tangled titles.
• Land retention: Help families keep and maintain their land.

One important tool is the Uniform Partition of Heirs’ Property Act (UPHPA), a state law that reduces the risk of land loss. Other state-level policies can also provide protections and resources.

While mortgages offer securities and protections for borrowers, home-only loans and alternative financing like lease-purchase (rent-to-own) agreements have higher interest rates, shorter repayment terms, and chances for buyers to be taken advantage of. 

When landowners do not have a clear title or a deed to their property with their name on it, it is likely that they will be denied mortgage financing for a home. Some property owners turn to home-only, personal property loans for manufactured housing, but these loans have higher interest rates and denial rates. While there are housing finance products for manufactured housing, these loans only support the purchase of real property, which requires clear ownership of the land at the time of purchase.

Heirs’ property owners who cannot secure mortgage loans may turn to alternative financing. Heirs who purchase a manufactured home using alternative financing methods may be at risk of predatory lending practices. These risks leave heirs’ property owners unequipped to leverage the wealth of property ownership.

Some mortgage lenders will allow heirs to assume an existing mortgage with a legal document that proves their inheritance of the land. Additionally, researchers and financial institutions are working together to explore options that will allow heirs to access secure financing with demonstrated partial interest.

Another short-term solution for heirs’ property owners is opening pathways for them to access capital for their housing needs. Low-interest loans for home purchasing can prevent heirs’ property owners from entering predatory purchase agreements for manufactured housing or other structures.

When a property is still recorded under a deceased owner’s name, heirs who do not live on the property may not receive notices of tax bills. This can lead to tax foreclosure on the property, and often not until the overdue balance is too high to pay in a lump sum.

If an heir living on a property with a tax exemption clears the title, they have to reapply for the relief programs and may be denied exemptions that had been given to the previous owner. This can make the property taxes unaffordable for the new owner.

When a property is still recorded under a deceased owner’s name, heirs who do not live on the property may not receive notices of tax bills. This can lead to tax foreclosure on the property, and often not until the overdue balance is too high to Some states have policies in place that allow heirs to continue property tax exemptions when they inherit heirs’ property. Policies to protect heirs’ property owners from excessive tax burdens include entitlement to the past exemption if they notify the tax assessor, allowing retroactive exemption for a period of time, and allowing a legal affidavit proving the heirs’ partial ownership to qualify them for the exemption. More clarity is still needed for heirs to be aware of tax exemptions that they may qualify for, and more effective notification methods are needed for heirs to become aware of taxes owed on their property before the overdue sum is too high to manage.

Until recently, FEMA required that homeowners provide proof of ownership In order to apply for federal relief funding after a natural disaster. This requirement left many heirs’ property owners ineligible for disaster relief, since they do not have deeds or title to their property with their own name listed. While limited in its scope, FEMA has begun accepting proof of occupancy, and has some options for affected homeowners to verify their occupancy when applying for relief.

Allowing heirs’ property owners to submit multiple, alternative forms of documentation for disaster relief and home repair funds can ensure that property owners remain in their homes and communities. An expanded rollout of acceptable proof of occupancy documents for federal and local disaster relief and repair programs is necessary to make funds accessible to heirs.

Because heirs’ property owners are likely to be denied mortgage financing, home repair loans, and tax relief programs for their properties, they face the risks of debt, foreclosure, inadequate housing, and other challenges that prevent them from fully accessing the benefits of property ownership and building their wealth. Some heirs’ property owners may not make repairs or improvements to their properties, either because their tangled title makes them ineligible for repair loans, or because they are unlikely to be able to get any return on their investments.

When property owners cannot utilize their assets, or distant relatives are unaware that they owe taxes on a property, the property is more likely to become vacant or fall into disrepair. Communities with high rates of heirs’ property may face lower tax revenue, public nuisance filings for vacant properties, or other obstacles to preserving community wealth.

Current holistic and cross-sector approaches are needed to prevent the creation of future heirs’ properties and support current owners with title issues. Heirs’ property owners need legal services, mediation, access to flexible financial capital, and education to navigate the complex process of clearing titles and preventing future issues.