How Intestacy Hurts Economically-Challenged Families

A very interesting situation is described by Bruce Smith in his article entitled Heirs defy history of blacks losing land, AP, Oct. 15, 2006.  The scenario arises when a person acquired land 100 or more years ago and and family members have just lived on the land without any formal intestate or testacy proceedings.

After generations, dozens or scores of descendants may have a claim to it.

With no clear title, any heir can seek his or her share of the value of the property. Since the land can’t be split into dozens of pieces, judges often order the sale of the entire parcel and split the proceeds. Sometimes third parties such as developers buy an interest from a single heir and then take the others to court to force such a sale.

Blacks have been especially victimized by the process, because they have been less likely to file wills. And as blacks migrated, many lost ties to the land and to family they left behind, and were willing to collect a few dollars for tracts they’d never seen.

Several states — Alabama, North Carolina and Georgia, among them — have instituted laws to protect heirs from losing their land. South Carolina has passed a new law that gives family members the right of first refusal to buy out their relatives’ interests if they are pressing to sell. The land is appraised, and they are given 45 days to pay fair market value.

Gateway is promoting another solution — limited liability companies. Family members form corporations that own the land, and become shareholders; any relative who wants to sell must do so to another family member or to the company itself.

Special thanks to Raymond Sheffield who brought this article to my attention.