The Consequences of Not Paying Your Property Taxes

When Geraldine Tyler, age 94, relocated to a senior community, she stopped paying property taxes on her home.

After the property was foreclosed on, the county where Tyler’s home was located sold the property for $40,000 to recover about $15,000 in unpaid property taxes. Tyler received none of the remaining profits from the sale.

In a case now before the U.S. Supreme Court, justices are hearing arguments to decide whether Tyler’s local government violated the U.S. Constitution by keeping more money than it was owed and not returning surplus funds to her.

One of the key issues in this case is whether Minnesota’s Hennepin County violated the Fifth Amendment, which prohibits taking private property for public use without just compensation.

Tyler owed $2,300 in property taxes and approximately $12,700 in interest, penalties, and costs. Hennepin County foreclosed on her home and sold it for $40,000. After repaying itself, it kept the $25,000 remaining and left Ms. Tyler with nothing. Tyler contends this is a violation of the U.S. Constitution. The Supreme Court is expected to rule on the case by June.

Why This Case Is Important for Seniors

The Tyler case highlights an all-too-common issue many elderly homeowners experience after transitioning from their home to a nursing home, a senior community, or assisted living facility.

Many seniors do not sell their home because they wish to leave it to their heirs. However, this transition can often lead to seniors losing track of their finances and failing to pay certain obligations such as their property taxes.

The consequences of doing so can be severe. One is the loss of equity in your home. Another is the loss of the opportunity to transfer wealth from one generation to the next and minimize capital gains taxes paid by heirs. For many people, their home is their most valuable asset.

As people age and depend on a fixed income, many fall behind on their taxes. While this may be a stressful issue, it should not be ignored as it can lead to them losing all the equity they have in their homes.

If you or a loved one may be facing this situation, talk about it before it gets out of hand or unmanageable.

What You Should Do

What can you do if you or a loved one have questions about your property tax obligations as the transition to a different stage of life happens?

First, understand that as long as a person is a homeowner, they must pay property taxes. However, in many states, once a homeowner reaches a certain age or their income decreases, they may be entitled to a property tax exemption or discount. The homeowner should apply for this as soon as possible once they become eligible, as in some states, it can reduce the obligation amount significantly.

If your loved one is in a nursing home or elder care facility, speak with them about the issue and see if they are up to date. If you have a power of attorney for an elderly family member or friend, check in with the local tax assessor and verify where things stand.

Finally, if you are behind on property taxes, be proactive about resolving the delinquency. Many local governments have programs to help homeowners repay their debt and keep their property.

In the Tyler case, Tyler, by law, had the right to redeem her property and repay her unpaid taxes, interest, penalties, and fees over three years. Other states have similar programs. However, these generally must be entered into within a specific timeframe. This is why addressing the issue as soon as possible is crucial.

Helping Senior Homeowners

The bottom line is that a homeowner, regardless of their age, needs to pay their property taxes to preserve the ability to transfer generational wealth to their heirs in the form of equity from their home.

Children, trusted friends, or caretakers may need to be proactive in helping senior homeowners assess whether they may have a delinquency to avoid the severe consequences of not paying property taxes imposed by some states.

Consider consulting with an attorney for further guidance. Find a qualified elder law attorney near you.

Editor's Note: In late May 2023, the U.S. Supreme Court ruled in favor of Geraldine Tyler.