Distribution of a Decedent’s Residence After Their Death

In the majority of estates, when a decedent passes they often have a home or other parcel of real property that was titled in their name. In most instances, the executor of the estate will market and sell the property and the proceeds from sale will go to the decedent’s estate to be distributed in accordance with the decedent’s Will. What happens, however, if one of the decedent’s heirs wishes to purchase the property, or if the house passes under the Will to the decedent’s heirs with each of them possessing an ownership interest in the house? The process for resolving both situations can be very similar, or could have divergent paths. This blog will address the partition of the property, which is a court action to resolve the heirs’ competing interests to the property.

Recently, the New Jersey the legislature amended N.J.S.A. 2A:56-47 which addresses the partition of a real property which may pass pursuant through a decedent’s estate. The revisions to this statute have established a statutory framework to resolve disputes as discussed above.  First, however, it must be determined if this statute is applicable to a dispute concerning a property which passes through an estate. In making its determination, the court must determine whether the property is “heirs property” as defined by the statute. The statute defines heirs property as real property that is held by tenants in common. It must also be demonstrated that no agreement exists which binds all cotenants and governs the partition of the property, and further, one or more of the cotenants must have acquired title from a relative whether living or deceased, and 20% or more of the interests are held by the cotenants who are relatives, or 20% or more of the interests are held by an individual who acquired title from his/her relative. In essence, the statute was designed to govern the disposition and partition of real property when it passes through a decedent’s will to his/her heirs.

Provided the real property qualifies as heirs property, as defined by the statute, the statute sets forth a procedure as to how the partition of the property will occur. In general, unless the parties agree amongst themselves, the court will appoint a special master to partition the property. The first action taken by this court appointed individual would be to obtain an appraisal with regard to the fair market value of the property. Subsequent to the appraisal, the interested parties have a right to object and to engage in further proceedings concerning the appraisal. In the absence of objections to the appraisal, the special master may seek to sell the property, and thereafter, distribute its proceeds to the estate/heirs. Co-tenants, however, do have a right to seek to purchase the property for the appraised value reflected by the appraisal by buying out the shares of the other co-tenants in the property. This newly revised statute provides for other detailed procedures in the event of a co-tenant or other co-tenants seeking to buy property. This blog will not explore all those permutations, as they would merit a blog of their own. For the purposes of this article, however, the partitioned property will either be sold by the special master with the proceeds being transferred to the co-tentants of the property, or the property will be purchased by a co-tenant or co-tenants for the appraised value with compensation being provided to the other heirs/co-tenants.

The creation of this new statute is significant, as it provides a procedure pursuant to which inherited property can be distributed and partitioned. In the past, there was case law which dealt with these same issues, as well as the relevant statute. The newly revised statute, however, codifies the case law and provides a clear mechanism by which this property can be transferred or sold. As such, it is important that heirs of an estate be aware of this new statue and how it may affect the disposition of inherited property.