An estate planning attorney will tell you that assets need to be properly titled, so that your estate plan aligns with the assets. In some cases, you can use joint ownership of an asset to have the asset pass directly to an heir at the time of your death. However, it’s not always the right way to do it.
Every estate plan is different, because every family’s situation is different. However, any estate plan can be undermined, if assets are not titled properly. This is examined in the article, “Joint-ownership property titling can avoid costly probate process,” from Reflector.com, with a look at five ways of titling assets.
Joint tenancy. In this situation, two or more persons own equal shares of a property. The owners don’t have to be related or married to each other. When the asset is owned jointly by spouses, the asset is passed onto the surviving spouse at the death of the other spouse. However, when the asset is owned jointly by unmarried people, the entire value of the asset is included in the deceased’s estate and is subject to probate. Therefore, joint tenancy might not be the best property titling method, if you want to share joint ownership with somebody other than your spouse. If one of the owners doesn’t honor his/her financial obligations, the asset can be subject to the pursuit of creditors up to that owner’s respective ownership percentage.
Tenancy in common. This is similar to joint tenancy in many ways. However, the big difference between joint tenancy and tenancy in common, is that the relative ownership percentages of the tenants in common may differ. One owner can own 25% of the asset, while the other can own the other 75%. If one tenant in common dies, the percentage of her ownership in the asset is included in her estate and is subject to probate.
JTWROS. Joint Tenancy with Rights of Survivorship (JTWROS) means that the right of survivorship distinguishes JTWROS from joint tenancy and tenancy in common. When the owner dies, her share of the ownership is transferred to the surviving joint owner automatically by operation of law without probate. Each joint owner also has the right to transfer or sell his or her interest in the property without the consent of the other joint owner, and thereby destroy the JTWROS status. Were this to happen, it would convert a JTWROS into a tenancy in common.
Tenancy by entirety is a JTWROS between spouses. However, neither spouse can transfer or sell their interest without the consent of the other spouse. Tenancy by entirety is better protection from the creditors against one spouse than a JTWROS. That is because the property isn’t owned by either the husband or the wife but by the marital entity.
Community property. This is recognized in Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Community property provides that married couples own an equal and undivided interest in all properties accumulated while they are married. Each spouse owns half of the value of the community property, and either spouse can transfer or sell one half of the property. When one spouse dies, one-half of the value of the community property is included in the probate estate and gross estate of the deceased spouse.
Talk with your estate planning attorney about how to title your assets, to ensure that your estate plan works the way you want it to. If you need to make changes, don’t wait—delaying this important step can lead to a wide range of estate problems for your heirs. One of the many differences between Legacy Counsellors, P.C. and other estate planning firms, is that we work with you, often doing the bulk of the work, to retitle your assets. We make sure that your assets align with your estate plan so that your estate plan is completely effective.
Reference: Reflector.com (December 2, 2018) “Joint-ownership property titling can avoid costly probate process”