Estate Planning Among Native American Farm Families 

Among no other community of farmers and ranchers is the subject of estate planning more important and critical at this time than among farm families who are Native American and particularly who farm or ranch on trust land.

Trust Land 

What is trust land?  Trust land actually first appeared during the treaty making period that took place between Indian Nations in North America and the new United States.  This period was from 1744 through 1871.  During that time period, Tribes and Tribal people in North America relinquished, sometimes by force, millions of acres of land that had been traditionally and communally farmed by them and their ancestors prior to the influx of Europeans.  The relinquishment of those acres occurred, most often, for designated areas known as reservations. 

During the late 1800s, two groups pressured the United States government to allot Indian land to individuals instead of two Tribal groups.  The treaties entered into by the government prior to late 1800s passed the land in reservations onto the Tribal groups, the land being held traditionally in a communal land use system.  The U.S. government decided in 1887 to allot Indian treaty lands and in February 1887 the General Allotment Act, also known as the Dawes Act, was signed into law.

The Dawes Act 

The Dawes Act authorized dividing reservations into allotted tracts of land to individual Indians.  Each head of household received 160 acres; single individuals over 18 received 80 acres; children under 18 received 40 acres.  Any remaining land was sold to non-Indians through “surplus” land sales.  Native Americans lost 90 million acres before the Allotment process was ended in 1934, when the Indian Reorganization Act was passed.

The Dawes Act stated that when the owner of a piece of property died, the Bureau of Indian Affairs was to give each heir an undivided share of land that had not been partitioned or physically divided.  The Bureau of Indian Affairs, in essence and in reality, never took the land to court to have it physically partitioned and thus divided in reality.  They merely “divided” the land on paper; thus the number of owners per parcel of land grew as time went on. 

It is not unusual for many Indian landowners today to find themselves co-owners with hundreds of other landowners within tracts that were originally held by one individual when original allotment was made.

Writing of Wills 

European settlers brought with them the desire to establish a property system in this country that while based on the traditional property systems of Europe and England particularly, was highly focused on the idea of private property rights.  European settlers while establishing the new laws for the new country and its states, through legislative enactments and constitutions, created a system of property rights that, of course, recognized the rights of the individual to pass property through generations by the writing of wills and through the passage of property in agreed upon manners at the state level should wills not be written. 

Native Americans, on the other hand, were not allowed to write wills to pass property to future generations until 1910.  The Bureau of Indian Affairs, in most cases, continues to this day the practice of dividing land on paper and not actually partitioning the land physically as generations pass. 

Land Fractionation 

The problems caused by the historical basis of Native American land ownership and carried through to this day by the practice of “paper partitioning” have led to what is called “land fractionation.”  This is the owning of small undivided interests in a piece of property by a large number of people.

When land fractionation occurs, many problems occur:

• Difficulty in management of property
• Difficulty in sale of property to others
• Difficulty in transfer of property to a new generation of farmers and ranchers
• Income from the property per owner becomes smaller and smaller
• General use and control of the land by individual owners becomes more difficult.
  • Leasing – whose signatures must I get in order to lease the land legally
  • Probate and estate planning – who will get the property when I die
  • Land data – how do I assemble records for the property that I own so that I can share this information with my lender
  • Ownership data – who are the other co-owners and where are they
  • Land location – where is the land that I own
  • Value of land – how much is my land worth
  • Acquisition of land – how do I buy additional land interests of other fractionated landowners.

All these issues and questions become hard to answer when land fractionation exists.  This circumstance is why estate planning is critical to Indian landowners. 

Writing a Will

If an individual does not have a will certain things occur.  Historically, if an Indian landowner died without a will the following was capable of happening:

• The State laws of intestate succession determine who will receive a person’s property, unless
• A tribal inheritance code is in place, which takes the place of state law regarding trust property
  • The First question for Indian landowners then was: does your Tribe have an inheritance code in place?  If so, the Indian landowner must evaluate the status of her land in relation to that inheritance code
  • If your Tribe does not have an inheritance code in place, the State law where the property lies will be applied, which means:
    • The land could be given in ways you wouldn’t choose
    • The land could be further divided and in ways you wouldn’t choose
    • The land may pass out of trust or restricted status because it would pass to a non-Indian spouse by state law.

Without a will the Bureau of Indian Affairs or a state probate judge would decide what to do with the property.  The Bureau of Indian Affairs could decide how to divide the property and if there was any money in a trust account that is attributed to income from that property, the Bureau of Indian Affairs could also decide what to do with those funds.

The state probate judge would then decide what to do with the rest of our property (that is not real estate).  This property can include other non-restricted or non-trust land, cars, personal effects, furniture, jewelry, boats, and all those other personal items you might have accumulated.  If you die without a will the state judge could decide who among your heirs will get such personal property.  This is decided under the state law and it differs from state to state.  In some states, the surviving spouse takes a certain percentage; in other states the spouse’s percentage is equal to children; in other states the surviving spouse’s percentage is greater than the children’s; in some states property is held as “community property” which requires it to be divided in different ways than if you lived and held property in a state that was not a community property state.

If, however, your Tribe has an inheritance code, then your personal property is divided according to the laws of the Tribe. 

A Legal Indian Will 

An Indian person may write a will and in order to meet the criteria under federal law to be declared a valid will, the will must be:

• Be written by someone 18 years of age or older
• Be written by someone with “testamentary capacity” – in other words, someone who knows who their heirs are, what they own, understands what the will does and have the mental capacity to write a will (not be intoxicated or drugged)
• Must be in writing
• Must declare the will your “Last Will and Testament”
• Must be signed and dated
• Must be witnessed, signed by two people and dated
• Should be notarized.[1]

New American Indian Probate Reform Act[2] 

On October 27, 2004, the American Indian Probate Reform Act was passed by Congress. (S. 1721).   The Act (AIPRA) amends the Indian Land Consolidation Act and replaces previous amendments relating to land status.  The AIPRA directly affects ownership interests and rights in trust or restricted land unless the land is located in Alaska.  Most of the provisions in the AIPRA do not take effect until late 2005 but are extremely important to Native American producers and landowners.

AIPRA changes the way trust estates are distributed to the heirs of Indian landowners upon their death.  The changes do nothing but increase the importance of writing a will and doing an estate plan and specifically improve the ability of Tribal landowners to consolidate their interests in trust and restricted land which begins to deal with many of the land fractionation issues described earlier.  The sections of the AIPRA are discussed as follows:

Section One

Property Distribution, Wills & Estate Planning

The AIPRA creates a new nationwide probate code that changes how Indian owned trust property will be distributed among the heirs of deceased landowners if they die without a will.  Under the new law, changes are made that provide opportunities for Indian landowners or their tribe to purchase individual Indian interests in trust or restricted land at probate.  These particular changes take effect after one year. 

AIPRA introduces a ‘single heir’ policy for Trust probates that are not governed by a will.  Trust lands will be passed to the spouse or to the oldest surviving, child, grandchild or great-grandchild and in the event that there are no surviving direct descendents, Trust lands would pass to the Tribe with jurisdiction over that land.

Question:  Should the Indian landowner have a will?

Under the new law, Indian landowners’ rights are protected in their ability to transfer property by a will.  If you write a will, you can designate how your trust land will be transferred in trust to any Indian person or to your descendants even if they are not tribal members.  The individual Indian landowner can control how their trust property is passed to others by creating an estate plan through a will or deed. 

Question:  What if the Indian landowner does not have a will?

If the Indian landowner does not have a will, the trust property will pass under the new federal probate code or an approved tribal probate code rather than under the state laws that currently govern Indian probate.  The trust land will continue to be inherited by the deceased’s immediate family.  The property will first go to the deceased’s children or grandchildren and possibly to the great grandchildren and if the deceased has no children, then to the deceased’s parents or brothers and sisters. 

All these people will be eligible to inherit trust property as long as each person meets the definition of “Indian” or are descendants within two generations of an Indian or are already co-owners in the same parcel. 

An “Indian” under the AIPRA is a person who is:  a member of an Indian tribe, or is eligible to come a member of an Indian tribe, or was an owner of an interest in trust or restricted land on October 27, 2004, or meets the definition of “Indian” under the Indian Reorganization Act, or if in California, any person who owns trust or restricted land in California.  The definition of Indian under the AIPRA is not to affect eligibility for other federal Indian programs.  Heirs who are not Indian may be able to inherit in trust if they meet the statutory requirements for being “eligible heirs”.  The best way to determine if your heir meets the definition of “eligible heir” is to contact a local Bureau of Indian Affairs office because the provisions of the AIPRA on this point are complex. 

If land does not pass to any of these people, it will then pass to the tribe where the land is located.  If the deceased has a spouse or other eligible heirs, the surviving spouse will inherit 1/3 of any money in the individual deceased’s Individual Indian Monies account at the time of the death and all of the money produced from the deceased’s interest in trust or restricted land during the spouse’s lifetime.  Other heirs get the remaining 2/3 of the money in the Individual Indian Monies account of the deceased and the remaining ownership interest in the trust or restricted land. (The Indian Individual Monies accounts hold money placed there from oil and gas production, grazing leases, coal production and timber sales on individual Indian allotted lands.)

The deceased’s spouse may also continue to live in a family home located on allotted land.  If the spouse but no other eligible heirs survive the deceased, the spouse gets the Individual Indian Monies account and during the spouse’s lifetime, the money produced from the land interests.  The spouse may continue to live in a family home located on allotted land. 

The remaining ownership interest in land goes to the tribe where the land is located.  If the Indian landowner does not write a will and the ownership interest is less than 5% of the total, the spouse of the deceased may continue to live in the family home on the parcel and then the new probate law will limit inheritance to the oldest eligible children and then the oldest eligible grandchild or oldest eligible great-grandchild.

The department of Interior may purchase interests in the land that are less than 5% of the total, for fair market value during the probate proceeding without consent of the deceased’s heirs.  However, the Department of Interior is not allowed to buy small interests if the interest is passing through a valid will, or if the heirs are living on the land.  Spouses living on the parcel are also protected.

This provision alone demonstrates the importance of having a will. 

Question:  What happens with a will?

With a will the Indian landowner’s land can be transferred in trust to any Indian person, the tribe that has jurisdiction, or any Indian co-owners.  The Indian landowner can also transfer their land in trust to any of their descendants (children, grandchildren, great grandchildren and great-great grandchildren) even if they are not Indian.  The Indian landowner can control how their trust property is passed by creating an estate plan such as through a will or deed.  They can transfer their interests out of trust to anybody.  And for those Indian landowners who have spouses, even if the spouse is not mentioned in the will, the spouse may inherit some of the trust property.

Section Two

Consolidation of Ownership Interests

Due to the problem in land fractionated interests, the AIPRA had as one of its main purposes to preserve the trust status and reduce the number of small, fractionated interests in Indian lands.  The AIPRA has provisions providing individuals and tribes with more opportunities to consolidate fractionated interests and removes some restrictions on what tribes and individuals can do with their lands.

Purchase Option at Probate

Your heirs, other co-owners and the tribe where the land is located are able to purchase the deceased’s interests in the parcel of trust property at probate.  The purchase price must equal or exceed the fair market value of the land.  The heirs will receive the money paid for the deceased’s interests in the parcel instead of a share of the deceased’s interest in the parcel.  If the deceased’s heirs are to receive more than 5% interest in the parcel, or if they live on the property, their consent to the purchase is required.

Consolidation Agreements

Heirs have authority to decide how trust estate property will be distributed at the probate hearing.  They can determine whether they desire to inherit their share, or sell it to other co-owners or the tribe where the land is located.  They may also give their share to another named Indian person instead of inheriting it.  These provisions allow some of the problems in land fractionation to be addressed at the time of probate.

Other provisions of the AIPRA

Other provisions of the new AIPRA that can be of interests to Indian trust, allotted or restricted land include land consolidation options for landowners, partition of Indian land by sale, expansion of the federal “buy back” program and greater flexibility for landowners to consolidate and acquire interests during the probate process. 

AIPRA also enables Indian landowners to request the forced sale of undivided interests (known as “partition by sale”) in highly fractionated trust lands.  The “partition by sale” provision does not apply to all trust land, it only applies to those with large numbers of undivided interest holders.  Any Indian landowner with a trust interest in a parcel of land can request that the Department of the Interior force all interest holders – both Indian and non-Indian – to sell their interest in the parcel for fair market value.  The parcel of land is then auctioned off in a trust sale to the highest bidder.  These lands remain in trust, eliminating fee interests in Trust lands and increasing the value of the land to the new Indian owner.

AIPRA also provides individual Indians with greater access to their trust records and has provisions that are designed to promote federal accountability for the management of trust lands.  DOI must regularly produce reports that tell individuals exactly what trust lands they own, how those lands are being used and the amount of income that is being obtained from each trust interest.

In addition, the AIPRA provides for the development of a federal unified and more easily understood probate code for Tribes.  Tribes must now deal with 33 state codes regarding Indian probate matters.  By providing a unified approach some focus will be placed on ending probate backlogs concerning Indian land. 

More information[3]

The new AIPRA is vitally important to the Indian landowner of trust, allotted or restricted land and needs to be studied.  The AIPRA can do many things that give Indian landowners more control over their land upon their death and provisions that start to address land fractionation issues.  There are provisions concerning gift deeds, negotiated sales, land exchanges and other transactions related to the land. 

There are complex provisions of the AIPRA that the landowner needs to understand.  Officials with your Tribal government offices, Trust officers, local BUREAU OF INDIAN AFFAIRS offices, and organizations that specialize in Indian land issues must be consulted by the Indian landowner and the provisions of the AIPRA make it more imperative than ever that Indian landowners understand fully the nature of their interests and their heirs interests in their land and take appropriate measures to plan for the disposition of the land upon their death.