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Part 1: Why it is a bad idea to leave property to multiple people in your will

So it’s time to do some estate planning. Maybe you have a paid for home. Or some acreage in Denton county. Or a cute cottage on Cedar Creek lake. “Wouldn’t it be neat”, you think to yourself, “to leave it to my kids so they can all enjoy it together.” Stop right there. That kind of thinking has the potential to make family Thanksgiving dinner awkward for years to come.

Let’s start with a hypothetical: Mom passes away and in her will she leaves her home to her four children. The property is free and clear with no mortgage and consists of 40 acres in Ellis county with a 1,200 square foot farm house. Due to its location in the country and mom’s health she hadn’t lived there in several years. Our four heirs are are still sad over the loss of their mother however they are comforted that mom’s house will stay in the family. Upon going to the property for an inspection several problems stand out: The roof has missing shingles and is in obvious need of replacement, The grass and weeds are tall and in need of mowing, and posts supporting the barbed wire fence surrounding the property have fallen over.

In situations such as these it is my humble opinion that gifting real property to multiple people in one’s will is one of the worst things you can do to folks you supposedly care about.

Here are just a couple reasons why:

1. Maintenance responsibility
Any real property carries with it responsibilities for maintenance. The problems with this hypothetical home (lawn maintenance, fence mending, and roof repair) are fairly common along with things like foundation repair and air conditioner replacement.

So in our hypothetical, who pays for the repairs? Generally speaking, each owner of real property is liable for their portion of maintenance expenses. If a piece of land has four owners, legally (and in a perfect world) expenses are split four ways.

Where the rubber meets the road, things can be somewhat different. Heirs have different levels of wealth, different temperaments, and different standards of ownership. Plus some people just don’t like paying bills anyway, especially for a property that they never see in an area they don’t live in.

Ideally everyone chips in funds. In the real world one of the siblings fronts the money for repairs and then is forced to seek reimbursement from everyone else, many times with predictable results.

2. Maintenance vs. remodel
At what point does regular maintenance become an upgrade or a remodel? This is an important question as joint owners are responsible for their portion of maintenance to keep the house habitable. However joint owners are not necessarily financially responsible for remodels, upgrades, and other “enhancements”.

Is replacing an old air conditioner with a newer more efficient one considered maintenance? What about going with a metal roof that will last 70 years rather than a composite tile that will only last 20 – 30? Or putting new fixtures in a bathroom?

3. Property Taxes
No one that I know likes paying taxes. Property taxes in Texas have been a hot item over the last several years.

The heirs in this scenario are now part owners. With that part ownership carries part responsibility for the property tax burden. The general rule is the same as for maintenance: Each heir is responsible for their proportionate share. With an extra wrinkle: Property taxes in Texas attach to the property, not the owner. Taxing authorities don’t really care who pays as long as the property taxes are paid in full by someone. If the property taxes are not paid then eventually the taxing authority will file a tax lawsuit against *all owners* of the property and foreclose against everyone.

Again in theory and a perfect world each heir contributes their share of the taxes. In reality often times one owner really likes the property while the others might be indifferent. What ends up happening is a tax bill gets delinquent so the former pays the entire amount and then starts harassing the others to cough up their share…….which leads to awkward holiday gatherings.

4. Access / use of property
If three or more people jointly own a piece of property then this one comes up almost without fail.

In Texas all joint owners of property are legally entitled full use, possession, and access. It’s a nice dream but it’s also physically and logistically impossible. Our hypothetical features a 1,200 square foot house. Under the laws of Texas all four heirs and their families have the right to live there if they want to. The laws of physics on the other hand beg to differ.

Our hypo also has 40 acres of land. It is a personal guarantee that each heir will have different things they will want to use the property for. One may want to plant sunflowers and farm it. Another may want to setup a gun range. Another sees a place to go mudding on their four wheelers. Of course all these uses can’t take place on this property…….but the law says the heirs are entitled to do so!

And that’s even before discussing other joint ownership issues such as mineral royalties, timber harvesting, rental income, etc the disagreements from which all once again resulting in Turkey Day awkwardness.

5. Right of partition
The nuclear option. Simply put, this is the right of every partial property owner to be cashed out of their ownership if they so choose. In my experience the more people who own a piece of property, the higher the odds that one of them will want to forgo all the headaches previously discussed and get cashed out. Some times the other owners are able to come to an amicable agreement and buy out the heir. Many times they can’t. From there it heads to court where more often than not the judge appoints a receiver to market the land, sell all of it, and distribute the funds.

If you simply *must* devise property to heirs as part of an estate plan, there are ways to do it that *may* cut off some family discord. I’ll discuss some of them in Part II.

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