Tangled Titles: Do You Really Own Your Home? By Austin Estate Planning Attorney Zachary D Kamykowski

Untangling Tangled Titles: Homeownership, Property Deeds, and Estate Planning

If you are currently living in a property that you inherited, but the deed has not been transferred into your name, you may be surprised to learn that, under the law, you are technically not the owner. This legal situation is known as "tangled title." A tangled title negatively impacts a property's current occupant in several ways. It can also harm generational wealth and even contribute to fraud. As an estate planning attorney in Austin, I can help you resolve this matter!

For many households, their home makes up most of their wealth. However, until you resolve a tangled title issue, you cannot take full advantage of your home's value. Untangling a tangled title is often a complicated legal process that requires attorney assistance. There are costs, but the costs of not straightening out a title could be much higher in the long term.

How a Title Can Get knotted

Title and deed are legal terms used in real estate. The person who holds the title to a property is that property's legal owner. A deed is the legal document used to transfer property ownership from one person to another. Although a deed is an official written document, the title merely refers to the concept of ownership rights. You cannot actually hold a home's title in your hands.

A deed transfers the home's title from the seller to the buyer in a home purchase transaction. A deed also transfers homeownership to a person who inherits a house after a parent or other family member has passed away.

Titles can often get tangled in the intrafamily transfer of homeownership. A tangled title most commonly occurs when the person whose name is on the deed passes away and a surviving relative continues living in the home without their name being on the deed.

For example, you have lived with your aging mother and cared for her. She dies, and you stay in the home. You assume it is yours. Maybe her will specifies that you inherit the house. But an inherited interest is not enough. Until your name is on the deed, the home is not legally your property. You are now dealing with a tangled title.

Tangled titles are more common than you might think. According to the Philadelphia Inquirer, more than ten thousand properties in Philadelphia, or about 2 percent of the city's residential properties, have tangled titles.^[1]

Consequences of a Tangled Title

A tangled title places you in legal limbo, making it harder to do some things and impossible to do others. Tangled titles also create financial risks for individuals who live in a home without their name on the deed. Until you untangle a title, you may experience the following: 

• difficulty setting up utilities and obtaining homeowner's insurance
• inability to sell the property or take out a home equity loan
• failure to qualify for financial assistance to fund repairs
• inability to quickly transfer the property to the next generation or a spouse
• ineligibility to negotiate with a mortgage company or assert a tax payment plan, placing you at greater risk of foreclosure
• risk of deed theft
• risk to wealth building

The typical US household holds nearly 70 percent of its wealth in its primary residence. In Philadelphia, for instance, this problem threaten more than $1.1 billion in household wealth.^[2]

How to Untangle a Tangled Title

Remedying this issue can be relatively straightforward if the homeowner of record was the sole property owner. They left a will, and the will specifies to whom ownership of the property passes upon the homeowner's death.

The deceased's property goes through a court process known as probate. After probate, a new deed is drafted and recorded, and the heir becomes the owner of record. But several factors can complicate probate, including lack of a will, multiple heirs with an ownership claim, intrafamily conflicts, and shared ownership of the property.

Probate can take a year or more, and several fees accrue, such as administrative costs and attorney's fees. The Pew Charitable Trust estimates that, via probate, it costs around $9,000 to untangle the title of a property valued at approximately $90,000. A probate lawyer is not always required, but it may be in your best interest to get help from an attorney, especially if things get complicated.^[3]

Actual costs will vary depending on your situation. Because every property and every inheritance situation is different, you may want to talk to an attorney about what makes the most sense for you. You should promptly address a tangled title issue before a situation arises that further complicates things. An estate planning attorney can also help you set up a will to ensure that title issues do not occur again once a property is in your name. Contact me today!

^[1] Michaelle Bond, Tangled Titles in Philly Threaten More Than $1.1 Billion in Generational Wealth, Phil. Inquirer (Aug. 4, 2021), https://www.inquirer.com/real-estate/housing/dead-homeowner-unclear-ownership-tangled-title-philadelphia-deed-pew-charitable-trusts-20210804.html.

^[2] Id.

^[3] How “Tangled Titles” Affect Philadelphia, PEW (Aug. 17, 2021), https://www.pewtrusts.org/en/research-and-analysis/reports/2021/08/how-tangled-titles-affect-philadelphia.