Ownership Options with Clear Title

Clearing heir property title usually requires a lawyer to help draft documents, determine who heirs are and the size of their fractional interests, and coordinate communication with family members. Once you have decided to clear title, consider the following ownership options through which the land is not sold.

Families with clear title can choose to own the land individually or as a separate legal entity. Each option presented below has advantages as well as disadvantages. All require performing a quiet title action to determine who the heirs are and make sure there are no outstanding claims to the land. Also, someone outside the family may need to complete an affidavit of heirship (click here to seen an example). Before deciding what option is best for your family, it is a good idea to contact as many heirs as possible, get everyone's input, and consult an attorney.

Option	Advantages	Disadvantages
Partition in Kind. This is a legal process through which land is physically divided up among co-owners based on fractional interests. After the land is surveyed, property lines are drawn for each person. Each co-owner then receives an administrator’s deed for his or her portion of the land. Partitions in kind are performed under a written agreement that is signed by all of the co-owners and is filed and recorded in the local courthouse. In the agreement, each subdivided parcel is described. Partitions in kind may be done by court order if an heir petitions the court to divide the property.	Because each person has a clear deed to their portion of the land, they can develop it in any way they choose. They can get a mortgage, harvest timber, and may be eligible for housing programs or funding that require a clear title.	Because each person has a deed, they have the option to sell their land and do not need consent of others to do so. Family members do not have a say in who buys the land, how it is managed or whether it stays in the family.
Family Land Trust. Through a family land trust, co-owners form a trust. A trustee (who may or may not be a family member) is designated and makes decisions regarding the property on behalf of and for the benefit of the beneficiaries (the remaining family members). Since the trustee holds title to the land and it is not divided among heirs, the title remains clear. Although the beneficiaries might change as families expand or heirs die, the land remains the property of one grantee – the trustee – and there is no confusion about who pays the taxes and is responsible for maintenance. These responsibilities are stipulated in the trust agreement. The trust agreement also specifies how any income generated by the land is to be disbursed.	Because the title is clear and the trustee holds ownership of the land, it is less likely to be sold. The property can be preserved a lot longer than were it divided up.	There may be restrictions on how the land is to be managed or developed. It is important that the donors take care in selecting a trustee and deciding what the trust allows for.
Limited Liability Company. Existing family members form such companies. The family owns the company, which owns the land. The articles of organization, which are filed with the Secretary of State, specify how many votes each member is entitled to and how profits are to be distributed. The LLC can develop the property any way it wants – even build condominiums that could generate ongoing revenue for the family. Family members who want out can choose to sell their interests, but only to the company or family members.	The requirements to create limited liability companies are less complicated than those placed on corporations. Because the company has limited liability, members are protected from actions and debts incurred by the company.	Alabama levies an annual "privilege tax" on limited liability companies – a fee paid for the benefit of limited liability. A LLC also has to file a separate tax return.

Last Updated: Jun. 22, 2011