Report Details Impact of Property Tax Foreclosures on Inherited Wealth

Consumer advocates examine "tangled title" situations, propose solutions to preserve inherited property

A new report from the National Consumer Law Center (NCLC) details the potential challenges faced by heirs when an inherited property is subject to property tax liens and 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.

NCLC describes how gentrification can impact the potential inherited wealth established by a property transfer.

“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.” 

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. 

“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.”

NCLC makes several recommendations to address this challenging issue, 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.

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