How a Person Owns Property and its impact on Estate Planning

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Ownership for the individual

For a single person, how property is owned is very simple. It is easy for people to understand that if they are single and have the deed to their home in their name, they are the owners. Or, if someone opened a checking account in their name, they are the owner of that checking account. If a single person dies, what type of property is owned will determine to whom the property is transferred. Checking accounts, brokerage accounts, 401(k)s, IRAs or other type of financial institutional account are referred to as payable-on-death ("POD") or transfer-on-death ("TOD") accounts. When a person opens this type of account they designate a beneficiary who gains ownership of that account upon death of the account opener. This will occur outside of probate under the operation of law. Even if a will states otherwise, a TOD/POD account ownership will be transferred to the listed beneficiary. Real estate will transfer by either designation in the testator's will or via intestate rules.


Joint Tenancy

Joint tenancy means that each person has equal interest in the property. It typically arises between husband and wife with respect to ownership of the family home or parent and child for other property. The primary feature of joint tenancy is the right of survivorship of that property. This means that if two people own property and one of them dies, the surviving person will receive full ownership rights by operation of law in that property. For example, if a husband and wife own a home in joint tenancy together and the husband dies the wife will be the sole owner of the home. A will stating otherwise is ineffective because the passing joint tenant's rights in the property extinguish on their death. Joint tenancy can also be used to own financial accounts like a checking, saving account. Regardless of who is listed as a beneficiary on the account, the joint tenant takes the property. Look to see on a bank statement the letters "JTWROS" or "JTROS" denoting joint tenancy.


Tenancy in the Common (TIC)

Under TIC, each person is still entitled to possession as a whole but each can have unequal interests in the property. Two people can have a 60/40 ownership split or three people can split the property 40/30/30. For real estate, this form of ownership is most common where the co-owners are not married or have contributed different amounts to the acquisition of the property. Unlike joint tenancy, tenants in common have no right of survivorship. This means if one tenant in common dies, the dying tenant's interest in the property will be part of the estate and pass by inheritance to that owner's heirs by will or intestacy. If an unmarried couple purchases a house, and one of them dies, the surviving member would not take over full ownership of the home, but the interest in the house of the dying person would pass to that person's heirs. The same result occurs for financial instruments. The heirs of the dying tenant would become tenants in common with the surviving tenant.


Tenancy in the Entirety or Entireties

The last type of ownership is tenancy in the entirety or entireties and is only available to married persons and generally restricted to real property. Ownership of property is treated as though the couple were a single legal person. Like joint tenancy, the tenancy by the entirety also encompasses a right of survivorship, so if one spouse dies, the entire interest in the property passes to the surviving spouse, without going through probate. Further, only a joint creditor to the married couple may severe the tenancy.

Additional Resources

January 2010 "The Future Estate" further explains this issue

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Intestacy and probate

Intestacy occurs if someone dies without a valid will. In this case, the estate goes to probate and is distributed according to the state's intestacy laws.

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