The Lurking Dangers of Heirs’ Property – Boston College Law School Magazine

The BC Law Initiative on Land, Housing, & Property Rights (ILHPR) took aim at the issue of heirs’ property and its impact on the racial wealth gap over the course of a two-day conference on March 21-22. Under the direction of Drinan Professor Thomas W. Mitchell, the ILHPR seeks to expand and preserve property rights for disadvantaged communities that are disproportionately impacted by issues such as urban decay and renewal, redlining, housing affordability, inequality, and heirs’ property, communities that are disproportionately though not exclusively Black and brown. Through legal reform advocacy, community outreach, and estate planning education, the initiative hopes, among its various goals, to narrow the racial wealth gap by helping owners fully realize the economic potential of their property.

In the United States today, well over $32 billion dollars in real estate—and perhaps as much as $450 billion—is estimated to be tied up as heirs’ property, a highly unstable form of property ownership. When a property owner dies intestate—lacking a formal will or estate plan—his or her descendants often endure decades of legal headaches as they try to establish their legal ownership of the property, often being unable to do so in the end.

Instead of being passed onto a particular person or small group of people in a well-defined way resulting in those people having clear, marketable title, the ownership interest in a family home or farmstead often becomes highly fractionated, with any number of heirs taking over as tenants in common but with none of them having clear title to the property. This opens the door to predatory investors looking to take advantage. The laws in every state allow such speculators to acquire the fractional interest of just one heir no matter how small that interest and force a sale known as a partition sale, whereby the property is sold as a whole with the proceeds of the sale split among the common owners based upon their percentage ownership interests.

Heirs’ property issues can result in land or homes sold for far less than the fair market value, loss of substantial generational wealth, and sometimes a severe reduction in the quality of housing for those who had lived on the property, even resulting in some of these people becoming homeless.

Too often, this results in land or homes sold for far less than the fair market value, loss of substantial generational wealth, and sometimes a severe reduction in the quality of housing for those who had lived on the property, even resulting in some of these people becoming homeless.

At the conference, one panel, “Quantifying Heirs’ Property: Methodologies and Significance,” laid bare the staggering scope of the issue today. Moderated by Cassandra Johnson Gaither, a research scientist at the Southern Research Station of the US Forest Service, the panel also featured Maria Evans, VP for sustainable communities partnerships at Fannie Mae; Natasha Moodie, research associate with the Housing Assistance Counsel; Professor Ryan Thomson of the Department of Agricultural Economics and Rural Sociology at Auburn University; and Kara Woods, research analyst with the Socially Disadvantaged Farmers and Ranchers Policy Research Center at Alcorn State University.

According to research from the Housing Assistance Counsel (HAC), over 580,000 residential properties have been identified as heirs’ property in the United States today, representing a total assessed value of $32.3 billion, a conservative estimate because about half of the data HAC had access to did not provide sufficient information for the researchers to determine whether the property was heirs’ property. Most of those properties are located in “persistent poverty” counties, counties that have had a 20 percent or higher poverty rate for over thirty years. In fact, property located in a persistent poverty county is twice as likely to be fractionated among a number of heirs, according to Moodie. “This aligns with the understanding that heirs’ property issues do not exist in a vacuum,” she said. “There are a host of systemic issues at play in areas with a high prevalence of heirs’ property.”

Two areas of the country that are most impacted by the heirs’ property problem: the so-called “Black Belt” of majority-Black counties across the southern United States (largely located in Mississippi, Alabama, and Georgia) and Appalachia.

Thomson explained in detail why his estimate of the value of heirs’ property in this country—$443 billion—is dramatically higher than other estimates. He identified two areas of the country that are most impacted by the heirs’ property problem: the so-called “Black Belt” of majority-Black counties across the southern United States (largely located in Mississippi, Alabama, and Georgia) and Appalachia, where entire state economies collapsed as the nation shifted away from coal. “No one by their own fault did anything wrong… many of these areas are ‘legal deserts,’ where no one is available to assist in the creation of wills,” Thomson revealed. “What we see is the creation of persistent poverty by systemic and structural factors, like minimal legal services, collapsing roads, decreased tax bases, and the closing of schools.”

Astonishingly, some counties in Alabama are over 95 percent absentee-owned, according to Thomson, a lifelong Alabama resident. “Outsiders own our state,” he lamented.

Woods honed in on the issue of Black agricultural land loss over the past century. During Reconstruction, Black Americans acquired farmland at a staggering pace; Black agricultural land ownership would peak in 1910, when nearly 16 million acres of land rested in the hands of Black farmers. That number would drop precipitously over the following hundred years, and by 1997, over 90 percent of that land was lost.

Woods is hopeful that the work of the Socially Disadvantaged Ranchers and Farmers Policy Research Center and other like-minded agencies will have a tangible impact on narrowing the racial wealth gap. “We don’t have to wait for another generation, it has to start now,” she argued, pointing out how every subsequent generation makes it harder to untangle the thicket of ownership interests. “The people who are alive today have to start making wills, and those with a fractionated interest have to put in the grunt work and start putting those interests back together.”

A later panel, entitled “The Racial Will-Making Gap and Efforts to Close It,” dove into the mechanics of wealth accumulation over the course of generations and attempts at increasing access to estate planning for people of color. Moderated by Terrence Franklin, partner at Sacks, Glazier, Franklin & Lodise LLP in Los Angeles, California, the panel began by posing a fascinating question: Why can’t we require people to draft a will or estate plan when they are in the process of purchasing substantial property?

Gal Wettstein, a senior research economist at BC’s Center for Retirement Research, noted that the United States has seen a 10 percent decline in will usage over the past thirty years. However, wills remain popular with the wealthiest households, which are disproportionately white.

According to surveys of Americans, a theoretical intervention by financial institutions during the mortgage writing process offering assistance with the creation of a will would have the unintended effect of lowering purchasers’ propensity to have a will drafted. “The process is already overwhelming, it’s a huge burden bureaucratically, a ton of paperwork,” Wettstein said, and survey respondents seemed less inclined to accept the prospect of more legal documentation at that stage in the process.

“The people who are alive today have to start making wills, and those with a fractionated interest have to put in the grunt work and start putting those interests back together.”

Kara Woods, research analyst with the Socially Disadvantaged Ranchers and Farmers Policy Research Center

A potential solution? Offering free estate planning services during much simpler transactions, such as opening a checking or savings account at the bank. “The complexity matters,” Wettstein said. “The ‘unsophisticated’ group responded strongly to estate planning suggestions in less complicated transactional settings.”

Jesse Williams, a law fellow with the Heirs’ Property Project at Wake Forest University School of Law, touched on just how sensitive an issue estate planning can be. “Talking about death is hard, it’s somber and incredibly personal,” he said. “It requires thoughtful, reflective decision-making,” the sort that requires attorneys to have difficult conversations with clients regarding the practical implications of leaving a home to multiple children, for instance. “Being in a place where you can build a relationship of trust, where a client can feel they’re getting the service from an attorney they deserve, is absolutely vital to solving these problems.”

The two-day event was co-sponsored by the Institute for the Liberal Arts at Boston College. It also featured a roundtable on the media’s role in highlighting heirs’ property issues; a presentation by Dewayne Goldmon, senior advisor for racial equity to the Secretary of Agriculture; and a panel on heirs’ property in the urban context that included James Leonard, commissioner of records in Philadelphia, a city that is a hotbed of activity in such property matters. Other panels discussed the role of federal institutions in addressing heirs’ property issues, provided perspectives from lawyers dealing with the problem on the ground, and talked about the impact of property tax foreclosures.

A notable feature of the conference was a screening of the award-winning documentary from Al Roker Entertainment Gaining Ground: The Fight for Black Land, a film in which Professor Mitchell is one of the main participants. After the screening, a panel discussion followed among Mitchell, Goldmon, Texas A&M University Professor John T. Cooper, Jr., Tharlyn Fox from John Deere, and the film’s director, Eternal Polk.

Photograph by Reba Saldanha