Hopefully, last week’s Legal Corner gave you a little clarity on the basics of a will and why it is so important to have one created. But, what happens in those difficult situations when a family member dies without a will or if the will is done incorrectly? What happens to their personal or, more importantly, their real property? Unfortunately, these are common questions that don’t always have a positive answer or result for most families. Let’s explore the impact of not having a will and how much it could affect an heirs’ rights to real property (heir property).
When a person dies without a will in North Carolina, this person has died intestate. Once a person dies intestate his or her property is distributed through the Laws of Intestate Succession. These laws clearly establish how the property will be distributed and what heirs will receive an interest in the property. An heir is anyone who has an interest in the property of the deceased. The division of property among heirs, generally causes the most conflict within families and in worse cases results in the loss of the property.
Under the Laws of Intestate Succession depending on the circumstances, a surviving spouse could be required to share interest in the deceased’s property with children, grandchildren, and in some cases parents. If there is no surviving spouse, the property could be divided between children and grandchildren. And in cases where there isn’t a surviving spouse, any children, or surviving parents the property would be divided among brothers and sisters and nieces and nephews. More importantly, if any of these people die without a will, their interest in the property passes to even more people. There is no limit to the number of heirs to intestate property, so several people could have an interest in one piece of land and some of them may never know it.
There are definitely disadvantages to owning heir property. When intestate property has more than one heir, each person has an undivided interest. This means each of the heirs have the right to occupy or use the entire property and not just a section. Consequently, all heirs are responsible for the taxes on the property, but the burden could be placed on one or two people if the others choose not to pay. If no one chooses to pay the taxes, the government could place a lien on the property and eventually foreclose. Additionally, each heir has a right to sell or transfer their individual interest in the property without the permission of any of the others. When this happens, the property could be open to a Partition Sale. A Partition Sale occurs, when a court requires the property to be sold and the profit from the sale divided among all the owners. These are only a few issues that could occur when dealing with land, but family businesses and homes are exposed to the same problems.
The good news is that there are some options when more than one heir is left intestate property. Particularly for land, the heirs can form a Limited Liability Company for the property or create a family trust for the land. The heirs of intestate property can choose to create a Limited Liability Company and transfer all the interest in the property to the company. Once the company owns the property it is protected, and decisions concerning the property are limited to those given authority in the company’s operating agreement. A family land trust is another method for preserving heirs’ rights to property. All owners of the property will transfer their interest in the property to the family trust. One person will be designated as the trustee, and the owners of the property will remain the beneficiaries of the trust and maintain all rights associated with ownership to the property. The land trust will protect the land from partition sales and prevents placing the tax burden on one or two owners.
As always anything involving state law or regulation can be complex. If you or someone you know is an heir to intestate property or if you aren’t sure if you are or not, contact an attorney and find out your options. There are various ways to resolve issues with intestate property once you know what you are up against.
Bellonora McCallum is an attorney at the McCallum Law Firm, PLLC, in Rockingham and Laurinburg. Reach her at 910-730-4064 or visit www.mccallumlawfirm.com