Dear Mr. Miller:
My Dad passed two years ago; my Mom died 10 years ago. He and Mom owned a house (at least I think they owned it) that Dad had inherited from his parents. My two brothers and I are the only living children. My sister died a few years ago with two children of hers who are still living.
My husband and I are living in the house. We want to remodel the house–bring it up to current style and amenities. We figure we’ll need about $75,000 to make that happen. There are no loans outstanding on the house as far as I can tell. Yet the bank says they can’t give us the loan because my grandparents still have title. That’s ridiculous, they’ve been gone for 20 years! What’s going on.
Having a Plan Is a Good Thing: I’m going to let you in on a really well kept secret—-inheritances, particularly real estate, rarely just happen. At a minimum, it takes some planning by the owner (apparently your grandparents) in order to have a Will or Living Trust or, at a minimum, create a form of title that does allow the inheritance to sort of “just happen.” Forms of title that would typically do this would be joint tenancy, pay on death, transfer on death, etc. That’s not to say that these forms of title are the best way to accomplish the goal, or even a good way necessarily, that depends on what one is trying to accomplish and the details and circumstances of the owner’s situation. In other words, the owner needs to have a plan rather than just “let it be.” And then, of course, carry out the plan.
Why Can’t You Get the Loan? There are a number of reasons here. First, I’m going to assume that the bank had a title search done on the county records to determine the current state of the title. That search is typically done through a title insurance company. The result of the search would be a preliminary title report that showed your grandparents as the owners of record. In other words, the last deed on record is that acquired by your grandparents. Your parents apparently lived in the property but never actually acquired title. It was just assumed that they owned it. This is often called “Heirs Property” and is quite common in the South and certain other regions of the country and causes the problems that we are about to discuss.
What Do You Have to Do Now? When your grandparents died a probate court proceeding should have been started. (In some states other than California this function might be handled by some other agency or even dealt with by the probate court clerk). That proceeding would eventually conclude with a court order (that is then recorded) determining who inherited the property from your grandparents based on either their Wills or the state’s law of intestate succession (i.e. the state’s rules on who inherits when there is no Will or Living Trust or similar approach). That proceeding was, apparently, never started and, hence, the current title is still with your long departed grandparents. Similarly, now that your parents have passed, there would be another probate court proceeding for them resulting in a court order as to who now owns the property (and you have to do both, not just the latter).
Divided Tenancy in Common Ownership: One of the problems of your grandparents not having a Will (if that was indeed the case) is that the ownership of the property is divided into potentially, many, many ownership interests all as what is called “Tenancy in Common.” (To see the different types of ownership formats one can have and the pros and cons, click here.) If your Dad had siblings, then they were part owners with him. Assuming some of them died, their kids, or kid’s kids are now owners. Similarly, your brothers are owners with you and are your deceased sister’s children.
Tracing the Family Tree: I had a situation like this a few years ago. No Will, about $750,000 owned by the decedent, and somewhere around 20 living family members. What you have to understand is that when someone with an ownership interest dies, their share passes to their children (or if deceased) the children’s children–and on down the line (think of a family tree and its branches and subbranches). So after accounting for the deceased siblings, deceased children, and the current living children of the deceased there were about 20 living heirs. We had to hire an Heir Search firm to find all of these people. Since the original decedent had moved from what was then Czechoslovakia, the search had to be performed in what was formerly Eastern Europe (where the records weren’t always as well kept as we might like).
So you are going to have to trace your family tree back to your grandparents, make a lot of phone calls to cousins and such to find out who’s still living and who died. Maybe hire that Heir Search firm (by the way, not all of them operate under a contingent fee agreement, some are hourly or even flat fee). Then you are going to have to go to court to get a court order from each of the two Probate proceedings you will need to commence. And then, after you and various cousins, etc. actually have title, buy some of them out or go to court to force that sale.
Guardian Ad Litem: And if any of the heirs are minors, that is going to make everything more expensive, since someone will need to be appointed to make decisions for the respective minor’s (called a guardian ad item).
Prevention and Good Practice: The prevention for this dilemma is fairly simple–have a plan whether it be a simple Will or a Living Trust or any of various other solutions. And then when an owner dies, call a qualified, Board Certified Specialist attorney in Estate Planning, Trust, and Probate Law to tie up the loose ends before those loose ends get out of hand.
Give us a call at 760-436-8832 so we can discuss and help you resolve this dilemma.