The policy-driven wealth gap is at the heart of racial disparities in estate planning

Copy of Southwest CDC

When examining the history of estate planning in the US, it is impossible to ignore the role racist policies have played in creating the current landscape. Today, only 24% of Black Americans have a will, compared to more than half of white Americans. This disparity is the direct result of centuries of discriminatory practices in housing and lending, some of which still exist to this day.

One way to study this gap is by looking at the ratio of white to Black per capita wealth. In 1860, when 90% of Blacks were still enslaved, the ratio was nearly 60 to 1. Ten years later, that number was cut in half to less than 30 as Black Americans gained access to some of the wealth accumulation opportunities that whites enjoyed since America’s inception. Into the 20th century, although slavery had been abolished, Black people were faced with institutional barriers to capital in ways their white counterparts never were. Poor whites were certainly excluded from the economy in many ways, but not because of their race.

Specifically, while whites were able to receive government subsidies for suburban homes which appreciated in value and were passed down to subsequent generations, Black Americans were once again systemically and economically abandoned. They were simply not eligible for these loans, explicitly because they were Black. Even the homes that were made available to certain sections of Black America were intentionally placed in disinvested neighborhoods, removing the potential for them to gain value the way suburban homes did. Researchers with the National Bureau of Economic Research concluded that if these racist practices hadn’t continued for the century and a half following the abolition of slavery, the racial wealth gap would be half of what it is today (3 to 1, instead of 6 to 1).

These historical facts are imperative to consider when it comes to the topic of estate planning. Having a will written requires interfacing with the legal system, something many Black Americans have understandably lost trust in over the years. In addition, there are often daunting fees associated with developing an estate plan. Handwritten wills which circumvent these obstacles can be scrutinized by the state and sometimes hold no legal bearing whatsoever. So with all that being said, why should Black homeowners still consider a will?

The answer lies in what can happen without one. When a homeowner dies without a will, their home becomes classified as “heirs’ property,” sometimes referred to as a tangled title. Through this process, the courts will designate shares by default to all of the homeowner’s children and grandchildren, regardless of who inhabits the property. Partition laws in Pennsylvania (and 27 other states) make it so distant relatives who may not even be aware that they own a tiny share of the residence can force the sale of the entire property, even if another relative has lived there for their entire life. Because of these laws, developers intentionally seek out these distant relatives in order to force a sale. These same developers often turn around and buy the property in a closed government auction for much less than it is worth, and that amount is distributed to the remaining heirs, who are usually unable to afford the house outright during the auction.

In recent weeks, Democratic members of the Pennsylvania House of Representatives introduced legislation that would force notification of all inheritors when one inheritor wants to sell their share. This would allow the other inheritors to buy the share and keep the property. But until this process is at least significantly reformed, homeowners who have been historically discriminated against should use every tool available to protect themselves and their families – including a will.

Southwest CDC will be hosting a Will Workshop with the Affordable Housing Centers of PA and Community Legal Services on Thursday, May 16 from 11:00 AM – 12:00 PM. Join us for more information on this important topic.

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