Preserving Inheritor Homeownership: Helping Prevent Property Tax Foreclosures

While inheriting a home may pose a new path to homeownership, many heirs have seen their fair share of difficulties in attaining or keeping the property. A new report from the National Consumer Law Center (NCLC) examines the unique issues heirs face when inheriting a home with an overdue property tax bill and the disproportionate impact on Black and Latino wealth building.

The report revealed that without clear title to the property, heirs may not be able to obtain homeowner’s insurance, obtain loans or grants for home repairs, or access utility or property tax assistance programs. Some heirs may not even know they owe taxes on the property, leading to tax liens and even foreclosure.

“Property Tax Foreclosures on Heirs Property: The Devastating Consequences and Recommendations for Prevention” discusses the problems of “heirs property” or “tangled title” and recommends steps states can take to prevent property tax foreclosures and preserve homeownership.

“The damage of ‘tangled title’ situations falls disproportionately on older adults in communities of color, and solutions can particularly help Black and Latino families build wealth and pass it on to future generations,“ said Odette Williamson, Senior Attorney at the National Consumer Law Center and co-author of the report. “Residents of these communities are more likely to suffer economic shocks that make it harder to pay property taxes or qualify for property tax relief. This is in addition to generations of discriminatory tax assessment practices and neighborhoods disrupted by gentrification.”

Heirs property owners face an elevated risk of losing their homes to property tax foreclosure or to investors who capitalize on property tax defaults. In general, most heirs qualify for a property tax relief program—a homestead exemption—that is available to owner-occupants, typically with an enhanced benefit for homeowners above age 60 or 65.

However, because of information gaps and unclear policies, many never obtain this critically important benefit. NCLC has developed a new initiative focused on helping older adult owners of heirs property protect the family home, funded by LISC Jacksonville (Local Initiatives Support Corporation) and the RRF Foundation for Aging.

“This important work will increase inheritance rates and expand the opportunity for more Americans to build wealth through homeownership, especially among our most vulnerable households,” said Kristopher Smith, Community Development Program Officer for LISC (Local Initiatives Support Corporation) Jacksonville. “Reducing the property tax burden will help heirs avert involuntary displacement and enable families to pursue educational, entrepreneurial, or other opportunities to ultimately improve their lives and uplift entire communities.”

“Older adults and low-income families shouldn’t be losing their greatest financial assets because they don’t have access to tax relief programs,” said Andrea Bopp Stark, Senior Attorney at the National Consumer Law Center and co-author of the report. “State and local governments should take intentional actions to increase access to the homestead exemption and other tax relief programs.”

The report recommends several steps that local governments can take, including:

• Recognizing that heirs are the owners of an inherited property upon death of the record title holder and should be immediately eligible for the property tax homestead exemption and other homeowner relief options.
• Clarifying that penalties for failure to report a change regarding the property cannot be imposed on heirs who inherit a property without a will in place, or by a will that is not yet probated, and who intend to make the property their primary residence.
• Providing the property tax exemption retroactively for a certain period of time if the heir can attest to living in the property and otherwise qualifying for the exemption during that time period.
• Requiring the tax authority, upon the death of any homeowner as determined through death records, to notify the heirs of the necessity to alert the tax assessor and of the application process for the property tax exemption.

“Ending the legacy of eroding homeownership in communities of color is a crucial piece of an overall strategy to reduce the racial wealth gap,” Williamson added. “The time is now to enact meaningful changes to preserve intergenerational wealth.”

To read the full report, including more data, charts, and methodology, click here.