What happens when you inherit property with other heirs, and one of them wants to sell? Can one heir force the sale of property? What are your options if you want to keep the property? Can heir property be divided?
This situation plays out more often than you may realize. For example, if you are inheriting a house with siblings, you and your siblings may disagree about what to do with the home. You have a sentimental attachment to the home and want to keep it in the family to eventually pass it down to your children, but both of your siblings want to sell it. Who gets their way in this scenario?
Continue reading to discover the answer to this question and other useful facts about heir property rights.
What Is Heir Property?
“Heirs’ property” refers to any property that has indications of familial ownership and was passed down to one or more co-owners from a relative.
Suppose your grandmother inherited a home from her parents that she eventually passed down to your aunt. Not long after, your aunt passes away, leaving the home to you and your siblings. In this scenario, the home would be considered heirs’ property.
If you are inheriting property from a relative, it’s important to understand whether the property in question is regarded as heirs’ property in the eyes of the law, since heirs’ property has special rules that apply to it. We review what these special rules are in the next section.
Understanding the Uniform Partition of Heirs’ Property Act in California
In general, if a co-owner of property wishes to terminate their interest in a property, they have a right to do so, even if none of the other co-owners wish to terminate theirs. But how would this work?
If the co-owner who wants to terminate their interest in a property cannot convince the other co-owners to get onboard, they can force the sale of the jointly owned property by bringing what is known as a partition action. This may seem unethical, but there is logic behind it. Basically, a co-owner cannot be forced to maintain ownership of a property they don’t want.
These partition laws were having unwanted effects when it came to properties that were being passed down inside families. Namely, outside parties were acquiring small fractional interests in heirs’ properties only to eventually force their sale for below market value if they could not reach a buyout agreement with the other co-owners.
All of this changed in January 2022 when California implemented a new law to protect heirs’ property from greedy spectators.
The Uniform Partition of Heirs Property Act does not allow heirs’ property to be sold until its non-partitioning co-owners have been afforded the opportunity to buy out its partitioning co-owners’ interests in the property at a price that represents the actual value of their shares.
The new law also strengthens the preference for partition by kind (i.e., physical division of property) in instances where a property can be fairly and equitably divided.
For example, if there are three co-owners and the heirs’ property at issue is a multi-family home with three units that are each worth $1 million, then the court generally would prefer a partition by kind over a partition by sale, since a partition by kind would allow each co-owner to have an undivided interest in the property with which they can do what they want.
When deciding between ordering a partition by kind or a partition by sale for heirs’ property, the court will consider factors such as:
- The sentimental, cultural or historic value of the property
- How the value of the property would be affected by dividing ownership
- Whether any of the co-owners would be rendered homeless by the sale of the property
If a partition by sale is ultimately ordered by the court, preference will need to be given to an open market sale over an auction sale, since the former has been shown to yield higher sales prices.
What Are the Rights of Heirs to Property?
Heirs are a decedent’s closest living relatives, such as their surviving spouse and children. There are many scenarios in which heirs may be entitled to inherit from a decedent’s estate, even if they weren’t mentioned by name in the decedent’s estate planning documents.
One of the most common scenarios in which an heir generally is entitled to property is through intestate succession when someone dies without a will. With intestate succession, the administrator of the estate will distribute all of the decedent’s property to their direct heirs using a predetermined formula.
An heir may also be entitled to inherit from a decedent’s estate if the decedent’s will or trust leaves assets to them. For example, the decedent’s will or trust may read: “My primary residence should be divided equally among my direct heirs.”
Another scenario in which an heir may be entitled to property is if a decedent’s will or trust fails to dispose of the entirety of their estate. For example, if the decedent purchased a new car toward the end of their life, and they failed to account for this new car in their will, then it’s possible the car will be regarded as belonging to their intestate estate, which means it would pass to their heirs.
Finally, heirs may be entitled to an inheritance if a decedent’s will or trust is invalidated due to a successful will contest or trust contest. In the event that the decedent had no prior valid estate planning documents, the decedent’s estate will be distributed according to the laws of intestacy following the successful contest.
While inheriting property generally is a positive experience, the situation can become complicated and possibly even unpleasant if you cannot agree on what to do with a property you’ve inherited with other heirs.
Find out more about the rights of heirs to sell or protect their interest in a property from the following sections.
Can Heir Property Be Sold?
When a property has multiple owners, it’s possible the owners won’t see eye to eye when it comes to deciding what to do with the property. Some co-owners may see the property for its cash value and wish to sell it, while others may have a sentimental attachment to the property and wish to keep it.
When one or more co-owners are seeking to sell a property against the wishes of the property’s other co-owners, a property dispute is likely to result. Typically, the co-owners who want to sell the property would override the co-owners who want to keep it, but as we touched on earlier, there are different rules that apply to properties that are considered heirs’ properties.
If the property at issue is considered heirs’ property, then the co-owners seeking a partition will have to provide the non-partitioning co-owners an opportunity to buy out their shares of the property at a price that reflects the true value of their shares. Only if the non-partitioning co-owners decline this offer can heirs’ property be subject to a partition by sale.
If a partition by sale is ultimately ordered, the court generally will require for the property to be sold on the open market, since historically, open-market sales result in higher sales prices.
Remember that selling heirs’ property can be a complex process because of the unique rules and procedures that must be observed. Hiring an attorney can take the stress and guesswork out of the process.
Can One Heir Force the Sale of Property?
One heir can force the sale of property against the will of the other co-owners if the property at issue is not considered heirs’ property. If the property is considered heirs’ property, then an heir can force its sale only if they first afforded the other co-owners the opportunity to buy out their interest in the property at cost, and they declined.
Partition actions are generally drawn-out court battles with a high price tag, so they generally shouldn’t be an option unless no alternative can be agreed upon by all the co-owners of the property. If you can come to an agreement with the other co-owners, then involving the court may not be necessary.
But what do you do if you’re a non-partitioning co-owner who lacks the funds to buy out the other co-owners‘ shares of a property?
Unfortunately, stopping a partition action is extremely difficult, but there are alternatives to a partition action that you potentially could float with the other co-owners.
Consider the following alternatives to a partition action:
- Propose a buyout agreement: Whether you want to sell your share of a property or keep it, you can try entering into an informal agreement with the other co-owners in which you either get bought out of your share of the property or buy out the other co-owners’ shares.
- Agree to a trade of property: If you want to keep a property that other co-owners are trying to sell, it may be possible to facilitate a property swap. Suppose you inherited several real properties from a parent’s estate. If one of those properties has sentimental value to you, but not to the other co-owners who are seeking to sell it, you could offer them one or more of the other properties you inherited in exchange for an undivided interest in the property at issue.
- Discuss a lease agreement: A compromise that could be made among co-owners of a property who cannot reach an agreement about what to do with the property would be to lease the property at issue. This way, the co-owners can maintain their ownership interests while earning rental income from the property.
- Agree to physically divide the property: This option isn’t feasible in most situations, since fairly and equitably dividing a property is challenging, if not impossible. However, when it is possible, it’s the ideal scenario, as it would allow every co-owner to have an undivided interest in the property with which they can do what they please.
It’s worth considering alternative solutions when there’s dissent among co-owners of a property surrounding what to do with the property. If an alternative solution can be agreed upon, it could eliminate the need for a partition action.
How to Refinance an Inherited Property to Buy Out Heirs
An heir may wish to maintain ownership of an inherited property, but they lack the financial resources to buy out the other co-owners’ shares of the property. In this situation, an heir may be able to refinance the property or get a probate loan to facilitate the desired buyout deal.
If a property is successfully refinanced (in what is called a cash-out refinance), a cash loan generally will be provided to the heirs seeking to keep the property that would be worth the value of the partitioning co-owners’ shares of the property. This would allow the heirs to buy out the partitioning co-owners’ interests in the property.
Another potential option for heirs who lack the resources to buy out other co-owners’ interests in an inherited property would be a probate loan. Probate loans function similarly to mortgages; however, with probate loans, heirs generally borrow against their expected inheritances.
If you wish to utilize one of these options, it may require collaboration with the other co-owners of heirs’ property. In the event the other co-owners are opposed to you refinancing the property or securing a probate loan, you still will have the option to try to buy them out of their shares of the property at cost. If you are unable to make this work, you will receive a payout for your percentage share of the property once it’s sold.
Can Heir Property Be Divided?
When it’s possible to fairly and equitably divide heirs’ property among its co-owners, the court typically will order what is called a partition by kind to allow each co-owner to have an undivided interest in the property (also called tenants in common). This option is generally only viable If dividing the property wouldn’t impair the rights of any of the co-owners.
For example, if dividing the property would significantly reduce the value of the property, a partition by kind usually wouldn’t be possible, as one or more of the co-owners would be taking a pay cut as a result of the division. In this instance, if the non-partitioning co-owners are unable to buy out the partitioning co-owners‘ shares at cost, a partition by sale may be the next best option.
Examples of properties in which a partition by kind may be appropriate include:
- Office buildings or other commercial properties
- Townhouses or condos with multiple floors and entrances
- Duplexes and other multi-family homes
- Land that does not yet have homes or buildings on it
Once a partition by kind is carried out, each owner will have the freedom to do with their undivided share of the property what they want.
Can You Build a House on Heir Property?
If you are a co-owner of heirs’ property, you cannot build a house on the land you co-own without first seeking permission from the other co-owners of the property.
That said, if you decide to move forward with building a home on land that’s co-owned, remember that any improvements made to the land will belong equally to all the co-owners. This applies even if they didn’t contribute to the improvement.
If the other co-owners are unwilling to get onboard with your plans, you may be able to seek a partition by kind to try to secure an undivided interest in the property. If you’re successful, then you likely would be able to build a home on the part of the property you own.
Before making any significant decisions around heirs’ property, it’s best to discuss your decisions with a knowledgeable attorney, who can fill you in on the pros and cons of each choice.
Can an Heir Living on the Property Be Evicted?
If an heir is residing in an inherited property without formally owning it or paying rent, they generally can be evicted. In other words, their status as an heir will not save them.
For example, suppose your adult sibling had been residing in your mother’s home before she passed away. If she directed for her home to exclusively go to you in her will, but your sibling refuses to move out of the property, they could potentially be evicted. Eviction proceedings would most likely be brought by the executor of your mother’s estate.
On the other hand, if your mother directed for her home to go equally to you and your sibling in her will, evicting your sibling would not be possible, since they co-own the home. They could, however, be required to pay you rent for the months they resided in the home during administration before formally owning it.
If you are asking about evicting an heir because you wish to sell a property that you co-own with them, you will first need to determine whether the property at issue qualifies as heirs’ property. If it does, and the heir in question wishes to keep the property, they will need to be given the opportunity to buy out your and the other co-owners‘ shares of the property at cost.
If a buyout deal isn’t made, a partition action can be brought by the co-owners of the property seeking a sale. If their partition suit is successful, it’s likely the court will order for the property to be sold on the open market, at which point the heir will need to move out. If they refuse, they could be evicted.
Remember, whether you are dealing with an eviction action or partition action surrounding heirs’ property, the right attorney can guide you through the process and maximize your chances of a positive outcome.
How Do You Clear Heir Property in California?
It can sometimes be a challenge to clear title to heirs’ property because heirs’ property is often passed down from generation to generation without any paperwork being filed to document changes in ownership. This lack of physical proof can result in questions about who truly owns the property and has the right to make decisions about it, such as whether to sell it or take out a loan against it.
In order to clear title to heir property in California, you may have to take a number of steps, including recording necessary paperwork to memorialize the death of a former real property owner, or even opening probate for a deceased former owner.
If you’re curious how to clear heir property in California, you may be surprised to learn it’s simpler than you think. Title to heirs’ property is usually cleared as part of the probate process.
Learn about the two most effective approaches for clearing title to inherited property from the following sections.
File a Petition for a Simplified Probate Procedure
If property is held in the name of a decedent whose estate is valued at $184,500 or less, a simplified probate procedure generally can be used, which can save the estate significant time and money. A formal probate can take anywhere from six months to a few years, resulting in estate beneficiaries/heirs having to wait an extended period for their inheritances.
With a simplified probate procedure, the process usually can be completed in a single probate proceeding. This includes clearing title to inherited property.
File a Petition for Probate
If an estate does not qualify for a simplified probate procedure, a formal probate will be required. A formal probate can take a long time because every asset in the decedent’s estate will need to be accounted for, their creditors will need to be paid, and their assets will need to be distributed to the right people, among other things.
During probate, the executor or administrator of the decedent’s estate will work toward clearing title to the property at issue with help from the court. Once title is cleared, and administration completes, the property will be distributed by the executor or administrator to its rightful owner(s).
If there’s a lien on your property, probate won’t necessarily clear it. There are several types of liens, including tax liens and judgement liens, and each of them has their own rules regarding how to remove them. Hiring an attorney is strongly recommended if you have questions.
FAQs on Rights of Heirs to Property
Feel free to explore our FAQs for additional information on heirs’ property and the issues surrounding it.
How do you get heir property in your name?
To get heirs’ property in your name, you will need to have the property deeded to you so your name is on title. This is easier said than done.
If you are asking about the rules surrounding heirs’ property because you are a non-heir who’s curious about how to buy heirs’ property in California, know that it may be an uphill battle if the heirs are unwilling to let you purchase the property.
If you are asking about the rules surrounding heirs’ property because you are entitled to property as an heir or beneficiary, the steps needed to clear title will vary depending on whether the property is held in a decedent’s estate or a trust. If the property is held in a decedent’s estate, a simplified probate procedure or a formal probate will be required in order to transfer the property to your name. If the property is in a trust, the trustee will need to formally transfer the property to you by executing a deed as part of the trust administration process.
Only after your name is added to the property deed will you be considered an owner of the property.
Do heirs pay tax on sales of inherited residences?
The short answer is “no,” heirs do not pay taxes when they inherit property. However, if the property is sold following the death of the prior owner, then the heirs could be liable for taxes on the gains, known as capital gains taxes.
You may also be wondering: Are heirs responsible for property taxes? Usually, the executor or administrator will pay any outstanding taxes owed on a property from the decedent’s estate; however, any property taxes accrued after a property is transferred out of an estate and into heirs’ names will need to be paid by the heirs.
Is selling a home to a family member without a realtor possible?
While it is possible to sell a home to a family member without a realtor, it’s generally not recommended. You may believe it’s a smart way to cut costs, but it could end up costing you more in the long run.
For example, you would need to hire a real estate attorney to draft a contract. You likely would also need to have an appraiser and home inspector look at the property. The process of marketing and ultimately selling your home without a realtor is also extremely time consuming, and could lead to liability if the correct steps are not taken along the way. For example, California has a number of required forms and disclosures that need to be signed by parties to a real estate contract by law, and failing to do so can cause real problems for the property’s new owner and former owner.
If you wish to go the route of selling a home to a family member without a realtor, be sure to consult with a qualified attorney first.
Do heirs pay capital gains tax on inherited property in California?
As we mentioned in a prior FAQ, heirs do not pay capital gains tax on inherited property if they keep the property or sell it without realizing a gain on the sale after the owner’s death. However, if heirs sell inherited property for a gain, they will owe capital gains tax on the profit they earned.
What is the best way to transfer property to heirs?
If you’re asking about the best way to transfer property to heirs, you either are someone who is planning your estate, or you are an executor/administrator seeking to transfer property out of an estate and to its rightful heirs.
If you belong to the former category, you can create a will or trust that provides for heirs to inherit the property in question. You also could use what is called a transfer-on-death deed, which would allow you to maintain ownership of the property until your death, after which point, ownership automatically would transfer to the heirs you named on the deed. Another option, albeit a less desirable one, would be for you to do nothing, as your estate would transfer to your heirs under the laws of intestate succession if you were to die without a will.
If you are an executor/administrator looking to transfer property to heirs, you can generally either sell the property in question and distribute the resulting earnings to heirs, or you could transfer the property to heirs by deeding it to them. Remember that if the property in question has been in the family for some time, certain heirs could have attachments to it. Before you sell it, it would be good idea to discuss your decision with them.
Can an heir sell property without all beneficiaries approving?
Whether an heir can sell property without all the beneficiaries approving depends on what the heir’s status is and on what the beneficiaries’ statuses are, as well as on whether the property in question is considered heirs’ property.
For example, if property in an estate has already been distributed to the heir and no other heirs co-own the property, the heir can sell the property without the consent of any other heirs or beneficiaries.
In contrast, if both an heir and beneficiaries have ownership interests in a property, the heir could potentially force the sale of the property against the wishes of the beneficiaries, but only if none of the beneficiaries are also direct heirs. If they are, then they would need to be given the opportunity to buy out the heir’s share of the property at cost before the property is put up for sale.
Contact Keystone with Your Questions About Selling Property as an Heir
Selling or dividing heirs’ property can be complicated. Take the stress out of the process by having a skilled probate attorney at your side.
The attorneys at Keystone exclusively focus on one type of law: probate. If you have questions involving inherited property, we have the knowledge and experience to help.
Contact Keystone today to request a consult with one of our attorneys.
