Help! I Owe Property Taxes on Inherited Property!
From time-to-time, clients will contact me because they owe property taxes on property that they did not even know they owned. Almost always, my client’s ownership arises from an inheritance they did not even know existed. Sometimes, the decedent is a fairly distant relative. Sometimes, the decedent is an estranged parent. Sometimes, it was just property that was forgotten over the generations. To many, this may seem like a “first-world” problem, and, to some extent, it is. However, the tax bill is real, the lawsuit is real, and the resulting foreclosure is real. Unfortunately, the value of the property is usually nonexistent. In fact, the taxes, penalties, and interest are often multiples of the property’s value by the time the lawsuit is filed, which is usually when the unexpected heir learns of her ownership.
The fact patterns follow a similar path. The owner of the property dies without a last will and testament, and no administration of the estate was ever started. Years pass with no one paying the property taxes for the subject property. To the extent that the property actually had any value, it continues to diminish. Unfortunately, the taxing jurisdictions still tax the property. And, once the tax bill is high enough to justify a lawsuit, the taxing jurisdictions will turn it over to an attorney for collection. A lawsuit is then filed, the heirs are determined, and my client is served.
Upon receiving a lawsuit, an heir should contact an attorney. From there, perhaps a bit of good news does exist. Prior to 2015, an heir only had a few months to disclaim inherited property. Normally, though, years pass before the heir learns of her ownership. In 2015, the Texas legislature fixed the problem by amending the disclaimer statutes. Now, a hard deadline does not exist. Rather, an heir can disclaim property at any time so long as certain conditions are met, such as, never exercising control over the property, among others. Also, an heir has the ability to disclaim some inherited property without disclaiming all the inherited property. This allows the heir to keep property that has value and disclaim property that is worthless.
Of course, once you disclaim property, it is disclaimed forever. So, an heir must be certain of her decision. However, when faced with a lawsuit for thousands of dollars (not including attorney’s fees) for a property that may be worth five hundred dollars, the answer is pretty simple.
The disclaimer statutes do not alleviate an heir’s need to file an answer to the lawsuit. If the opposing counsel never learns of the disclaimer and never receives an answer, then a default judgment may be entered against her. And, it can also take years to learn that the heir has a judgment against her. By then, it is often too late to do anything about it.
Therefore, if you are served with a lawsuit for past due taxes on inherited property that you do not want, you should hire an attorney, file an answer, and consider disclaiming it.
Robert Newton is an attorney based in Frisco, Texas, that practices real estate law, business law, and estate planning. This post is meant for informational purposes only and does not constitute legal advice.
