Posted Oct., 2007 Kurt R. Nilson, Esq.          |            CLICK HERE FOR MORE ARTICLES

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.

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.