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Introduction - Joint
Ownership
When considering the intestate
succession of real estate, it is important to
acknowledge that many forms of property are owned in a
manner that provides legally binding instructions for
ownership following the death of any individual or joint
owner. Of all types of property, real estate is
frequently owned in this manner. (Deposit accounts
are also frequently owned by multiple parties.)
All property that has legal
instructions for its ownership upon an owner's death is
excluded from the intestate estate and cannot be
controlled by the intestate laws.
Whether a house must be sold as part
of the settlement of an intestate estate will largely
depend upon how that house is owned or titled.
Joint Ownership - Spouses
Most spouses own their homes in a
form of joint tenancy known as a "tenancy by the
entireties." This form of title causes sole ownership to
transfer to the survivor upon the death of either
spouse. In these circumstances, the surviving
spouse has legal ownership of the entire house upon the
other spouse's death and no other person has a right to
claim a portion of its value. This includes
creditors, who cannot attach the house or request its
sale for payment of the deceased spouse's individual
debts.
Joint
Ownership - Children
Any two or more people, whether or
not they are related, can also own property in a manner
that gives ownership to the survivor or survivors upon
the death of any other owner. This form of
ownership is known as 'joint tenancy with the right of
survivorship."
Property owned in this manner is also
excluded from the distribution of the intestate estate
of each deceased owner, provided that any other joint
owner is living at the time of death.
For this reason, parents occasionally
transfer title their primary residence to themselves
along with one or more of their children as joint
tenants with the right of survivorship. When this
is done, the parent or parents normally intend to live
in the house until death.
Although the parent intends to retain
the same control as a sole owner property titled in this
manner is owned by all the parties. Even though
the parent may be the only person living in the house,
perform all maintenance, and pay for all of its
expenses, the parent cannot always deal with the house
as a sole owner. For instance, if the parent wants
to sell or place a mortgage on the property, each child
whose name is on title must also participate.
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Individually Owned House
If the property is not owned jointly
(and is not subject to any other conditions that
transfer ownership automatically at death) the
property's value is included in the intestate estate.
Like all other forms of intestate property, the house is
included in the intestate estate as its cash value.
With an assigned value, any heir
whose share of the intestate estate is equal to or
greater than the house's value has the right to ask for
the actual house as payment towards his or her share.
However, the administrator of the estate is not required
to grant this request.
When there is just one heir, that
person generally serves as the administrator.
Being the only heir, this person will be entitled to the
entire intestate estate and may elect to receive the
actual house rather than its cash value.
It is also possible that two or more
heirs may wish to own the house in lieu of a cash
payment from the estate, which will require an agreement
between them to prevent its sale to satisfy each heir's
share. When two or more heirs elect to receive the
house, they will take title together as joint owners,
but not necessarily as joint tenants with the right of
survivorship.
Estate Debt
Another consequence of having an
assigned value is that the house can be used to satisfy
the deceased's general debts, which will require its
sale in order to convert its value to cash. This
may not be necessary when the estate's other assets are
sufficient to pay all of the deceased's debts.
When the estate does not have
sufficient assets, any heir or heirs who want the house
may seek to purchase it from the estate and provide the
estate with the cash it needs to pay its debts.
In addition to general debts, such as
credit card balances, estate obligations also include
the intestate shares that may due to the heirs.
Even though all of the estate's general debts are paid,
the estate must still satisfy the share of every heir.
Once all the general debts are paid, any heir whose
intestate share is less than the value of the house and
who cannot afford to buy the remainder will be required
to take a loan or forfeit the house.
Finally, any mortgage against the
house will also need satisfied as a result of the
transfer at the sole owner's death. (Mortgages are
contractual and most have terms that require the
mortgage to be paid in full upon any transfer to another
owner.) If there are insufficient assets in the
intestate estate to satisfy the mortgage prior to its
transfer to an heir who wishes to live in the house, the
house will typically be sold to make the payment.
Again, this sale can be made on the open market or to
any heir who wishes to own it.
Controlling Intestate Law
It should also be noted that the
division of real estate is governed by the intestate
laws of the state where it is physically located, rather
than the state of the owner's permanent residence.
For instance, the intestate personal
property of a person who lives in California is
distributed according to California's intestate laws,
while intestate real estate located in New York and
owned by the same person will be divided according to
New York's laws of intestacy.
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