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When an individual dies without a will, the state of Texas follows a default set of rules to determine the distribution of the decedent’s assets amongst family members. This process is known as intestacy distribution. The intestacy distribution system divides the decedent’s assets between the surviving family members, generally moving from close family members (spouse, children, and siblings) to more distant relatives (nieces, nephews, and cousins) until the assets have been fully distributed. The decedent’s heirs—the surviving family members who are entitled to the decedent’s assets—receive a fractional share of the decedent’s assets.
Most Americans die without a will, and a majority of Americans’ largest asset is real property—usually their home. Real property can also include commercial buildings, rental properties, land, or even underground minerals such as oil and natural gas.
Imagine a decedent—Mom—dies with no will and a total of $300 in her bank account. If Mom’s only heirs are her three children (A, B, and C), then each child gets $100. Everyone likes to inherit money because it always proves easy to divide; however, if Mom leaves her home to the children, it is much more challenging for A, B, and C to divide this asset.
Under Texas law, A, B, and C become “tenants in common,” each owning a 1/3 interest in Mom’s house. Every child is an owner of Mom’s house and has an equal right to possess the house; however, because siblings often disagree, most people in this situation decide to sell the property.
If A decides that she wants to sell, but B and C refuse, A can still sell her 1/3 interest—in this case, B and C get to keep their respective interests. A will probably struggle to find a buyer willing to pay 1/3 of the value of Mom’s house only to share the house with B and C. Most likely, A will have to sell her 1/3 share at a discount, and she will lose out on the true value of her inheritance.
Alternatively, A could file a lawsuit to “partition” (divide) Mom’s house. Texas courts favor partition in kind (dividing the real property into sections and giving each heir a section equal to their ownership share), but many Texas courts have found that single-family homes cannot be partitioned in kind. When a court cannot partition in kind, the court will order partition by sale —selling the real property as one unit and dividing the proceeds between the heirs. If A forced partition by sale, B and C would not get to keep the property like they wanted. B and C are also less likely to get 1/3 of the market value of the property due to court costs, auction fees, or a lack of interested buyers.
To protect A, B, and C, Texas adopted the Uniform Partition of Heirs’ Property Act (“UPHPA”). The UPHPA creates a process for selling inherited property that allows heirs who want out of common ownership to sell their interest, while simultaneously permitting heirs who want to keep property to retain—and even expand—their ownership shares.
For the UPHPA procedures to apply, the real property must be “heirs’ property.” When a cotenant files a lawsuit to partition real property, the court will determine whether:
After the court determines that the property is heirs’ property, it next determines the fair market value of the property. The court can either appoint a disinterested real estate appraiser to value the property or the cotenants can agree on the value. If the court appoints an appraiser, all cotenants have an opportunity to present conflicting or supporting evidence at the final hearing setting the property’s value.
The key difference between the UPHPA and traditional partition actions is the cotenant buyout period. Under the UPHPA, cotenants who do not consent to partitioning the property receive the opportunity to buy the interests of the cotenants who seek partition. The UPHPA 1) ensures that all cotenants receive proper notice, 2) gives the cotenants a set time to elect to buy the other cotenants’ shares, and 3) grants time for electing cotenants to secure financing.
Returning to the earlier example: if the court in A’s lawsuit determined Mom’s house to be worth $300,000, then B and C receive a chance to purchase A’s share. Either B or C could buy 1/3 interest on their own for $100,000, or B and C could each buy half for $50,000. Because of the UPHPA, B and C get a chance to keep Mom’s house, while A also gets her money.
If none of the cotenants elects to purchase the interests of those who request partition, the court will enter an order which appoints a broker to sell the property. The broker will then pay the funds to the court for final disbursement to each of the cotenants. If B and C were unable to secure financing to purchase Mom’s house, then the house would be sold, and A, B, and C would receive equal portions of the sale proceeds after the broker’s fee and other expenses are paid.
Overall, partition lawsuits arise when multiple owners of property disagree on whether—or how—to dispose of real property. In Texas, the UPHPA creates a process for heirs to hold on to their inheritance by giving them an opportunity to purchase some, or all, of other heirs’ interests in the property.
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