Heirs Property Story: Wright Family

Client name: The “Wright” family (Actual names throughout have been redacted and replaced to protect the client’s privacy)

Acreage: 200+ acres

Location: Eastern North Carolina

Year the heirs’ property was created: 1958

Legal tools/strategies used: LLC formation, joint representation

Outcome: TBD

The Wrights are a large family, managing a sizeable plot of heirs’ property that has been in their families for decades. Although this story is still unfolding, the Wrights have a couple of things working in their favor: they have a representative structure for making decisions as a group, and they retained an attorney prior to any conflict arising regarding the land. With the help of students from two law school clinics, the Wrights are optimistic that transferring their interests into a legal entity will allow the family to keep the property secure for generations to come.

The Wright Family Land

In 1940, Randall Wright purchased 225 acres of farmland in eastern North Carolina. This was a substantial investment, and Randall intended that the land support his large family. He told each of his children that he wanted them to have a separate portion of the land on which to build a house, but he never recorded any transfers with the register of deeds. Randall died without a will in 1958. His wife Annie died four years later, also intestate. Dying without a will meant that Randall’s land passed under North Carolina’s intestacy rules, and after Annie’s death, each of their fourteen children acquired an equal share in the entire property. These children came to be known as the fourteen “original heirs.”

Intestacy rules apply when a person dies without a will, and they determine who is entitled to inherit from the person who died.

Over time, each of the original heirs had children and grandchildren of their own. By 2023, Randall and Annie’s descendants (by birth, marriage, and adoption) numbered at least 275. Some family members continued living on the land, some moved nearby in the county, and some moved to distant states and countries. No matter how far family members moved, there was always a strong belief that the land bought by Randall was an important asset and legacy that needed to remain in the family.

As the family expanded, the fourteen original heirs began to die, making decisions by consensus more difficult. Nineteen individual families continue to live on the land, but the Wrights did not want the burdens of property management to fall only on those family members who still lived on the land. The property was owned collectively, and the family shared the belief that they had  a collective responsibility to maintain it for the benefit of the entire family. To ensure responsibility was spread through the family, the Wrights developed a system of family meetings. On the fourth Saturday of each month, every living descendant of Randall and Annie was invited back to the property to discuss plans and issues around its use. Although not every family member attended each month, it was important to the Wrights that at least one descendant of each of the original fourteen heirs was present at each meeting. In their mind, everyone needed to know and believe that their voice was being heard.

Getting Legal Help

By January 2023, only one of the fourteen original heirs was still living, Evelyn Wright Eakins, age 86. The family meetings continued each month, and there was general satisfaction among the Wrights about the use of the property: a few family members lived on the land, a portion was rented out to a local farmer, and some was rented out to advertisers who placed billboards on the land. The income from the farmer and advertisers was enough to cover the property taxes and other maintenance costs and generate a small surplus that was distributed. Although Randall and Annie’s descendants numbered over 200, there had been no major disputes about how to use or manage the land.

During this time, Angelica, one of Randall and Annie’s great-grandchildren, was working with Legal Aid of North Carolina on an unrelated issue. She learned about heirs’ property from a lawyer there and realized that her family’s land was potentially at risk. Angelica contacted the Heirs’ Property Clinic at Wake Forest School of Law, seeking help with protecting her grandfather’s investment and ensuring that the land stayed in the Wright family. The Clinic was eager to help, but the first question to resolve was how to ethically represent such a large family.

Taking on each family member as a client was out of the question; there was no way the small group of two licensed attorneys and a dozen law students could logistically handle over 200 clients. Additionally,  there could be ethical problems if any of the represented individuals got into a dispute. On the other hand, having Angelica as the only client to  represent the entire family’s interests also didnot seem reasonable. Both the Wrights and the clinicians worried that having a single representative for such a large group might prevent or make it difficult for some individual’s voices to be heard, thereby causing unnecessary resentment. It was critical that the Clinic maintain credibility with the entire family; one aggrieved heir could put the whole property in jeopardy.

Ultimately, the Clinic and the Wrights settled on a modified group representation scheme. Eight individuals, each a descendant of a different original heir, were selected as clients of the Clinic and representatives of the entire Wright family. This ensured that multiple perspectives and family branches were represented. The group of eight clients was responsible for communicating with the lawyers and with the attendees of the monthly family meetings. Although the logistics of coordinating a meeting with all eight clients at once were occasionally difficult, having multiple perspectives and voices involved in decision-making helped build greater trust between the family and the lawyers.

Another small wrinkle in this model of group representation related to  confidentiality. Normally, an attorney cannot discuss any aspect of a client’s matter with anyone besides the client. This includes, members of the client’s family. The Wrights wanted the clinicians to be able to speak with any family member who came to a family meeting, so they agreed to a limited confidentiality waiver. This open flow of information allowed the family members who were not clients to trust that the clients and the lawyers were not hiding anything from them.

Legal Objectives: Consolidate and Clear Title

The Wrights had a clear goal for the land when they retained the Clinic: maintain some kind of collective ownership structure to ensure that future generations would be able to use and enjoy the property. Thus, the Clinic’s job was to determine the most appropriate method to accomplish this goal without creating unnecessary expenses for the Wrights.

Holding the property in a single legal entity would protect the property from many of the pitfalls of heirs’ property, including the vulnerabilities of holding land with cloudy title. Cloudy title makes it difficult for owners to use their land as collateral or participate in disaster relief programs because neither lenders nor relief agencies can be certain who the true owners are. Additionally, holding land in this way leaves the co-owners vulnerable to partition actions. Partition actions are one manner in which families with multiple co-owners and cloudy title can lose their land. A single heir (or individual who has purchased a single heir’s interest) can use the courts to force a sale of the entire property. This is particularly worrisome when there are so many heirs—more co-owners can result in a higher chance that someone could move for partition.

Cloudy title means that the registered land records do not show the current legal owners of the property, but rather, show the the name of an ancestor who has died.

After establishing that the Wrights would likely need a new legal entity to protect their land, the clinicians realized they were moving beyond their area of expertise and secured assistance from the Community Enterprise Clinic at Duke Law School. The Duke clinic specializes in entity formation, and the students there were eager to apply their skills to assist the Wright family. This collaboration between clinics is a great example of lawyers recognizing their own limits and finding the necessary support to accomplish their clients’ goals. Working together, the students from both clinics recommended that an LLC was the best vehicle to achieve the Wright family’s goals. The family agreed. Once the entity was formed, each family member who owned an interest in the property would transfer that interest to the LLC, thereby becoming an owner of the entity, rather than a direct owner of the land itself.

Benefits of an LLC for heirs’ property owners:

• The “LL” of LLC stands for limited liability. This means that family member-owners would not be personally liable for any debts owed by the entity.
• LLCs allow owners great flexibility in creating their operating agreement, the contract that dictates the owners’ rights and responsibilities, and rules for managing the entity. The Wrights can continue to manage their land collectively with added protections.
• Owners of an LLC can restrict the transferability of ownership interests. This means that the Wrights could require that heirs can only sell their shares to Wright family members, ensuring that control of the land remains in the family.
• An owner of an interest in an LLC does not have partition rights. Therefore, no family member could force a sale of the property through a partition action. This is especially important since North Carolina has not adopted the Uniform Partition of Heirs Property Act (“UPHPA”).[1]

Risks/downsides of forming an LLC to hold heirs’ property:

• LLCs must be registered with the state of North Carolina and must file annual reports with the secretary of state along with an annual fee of $200.
• There are potential federal income tax consequences when individuals convert their private ownership of real estate into shares of an LLC. These consequences may not lead to higher tax bills but likely require assistance from an accountant, which carries its own cost.

Next Steps

Students in the Duke Community Enterprise Clinic are drafting articles of incorporation and an operating agreement for the Wright family’s LLC. Once these governing documents are approved by the representative clients and filed with the state the Wrights can begin transferring their property interests into the entity. The most difficult part of that task will be determining each owner’s fractional interest in the property. As the only living original heir, Evelyn Wright Eakins is sure of her 1/14th share, but every other branch of the family has experienced multiple births, deaths, marriages, divorces, and other events that have affected individuals’ proportional interests. The Wake Forest Clinic is doing significant genealogical work to locate and clarify each heir’s share. Once that work is complete, the last legal step necessary to protect Randall Wright’s investment will be filing a “quiet title” action in the local superior court. This is a legal mechanism to request a judge to declare that the LLC is the sole owner of the property. Consolidation of title in this manner will simplify many aspects of managing the land, including obtaining credit or participating in government programs.

Lessons Learned

Answering the question of who is the client is necessary before any legal representation occurs, as it has many ethical implications for the lawyer and the potential clients. Here, the Wrights independently established their system of family meetings before the Clinics got involved, and that structure enabled representation that worked. Because of the Wright family’s previous work to include all their family members in decision-making regarding the property, the clinicians were able to hit the ground running solving legal issues for the Wrights rather than mediating intra-family conflict. Trust and cooperation among family members is a key foundation for working through heirs’ property issues, especially with a group as large as the Wrights.

Finally, the process of clearing and consolidating title can take significantly longer than people expect. The Wrights were fortunate to have started when they did, but the more they learned, the more they wished they had started earlier. Any individual or family who thinks they have an heirs’ property issue should not wait to take steps to address it.

Footnotes:

[1] The UPHPA has been introduced in the North Carolina state legislature several times but has not been passed. It was written by the Uniform Law Commission and has been passed in 23 states as of this writing. It was designed to address the devastating effect of partition sales and consists of three major reforms: 1) anyone seeking partition must first give their co-owner(s) an opportunity to buy out their interest at its fair market value, 2) if the buyout doesn’t occur, courts should have a strong preference for partition in kind rather than by sale, 3) any partition by sale that is ordered must be done through an open market sale for fair market value, rather than an auction.