By Dan Barney
The form of ownership is a key factor in structuring an estate plan. This is true primarily because the form of ownership governs the transferability of the interests.
Usually it is desirable to have some method of “automatic” transfer mechanism included in the title so that a probate is not necessary in order to transfer ownership to another person at the death of the owner.
We have previously discussed in some detail the use of the Transfer on Death Deed. However, there are several other types of transfer that can accomplish the transfer after your death without the necessity of Probate. In this and future articles, we will examine several of those techniques.
(A) Joint tenancy with right of survivorship. This form of ownership passes title to the survivor immediately upon death and avoids probate.
In joint tenancy with right of survivorship (W.R.S.), the transfer to the survivor occurs at the death of one of the joint owners.
Thus, to complete the transfer, it is necessary to confirm the death in the records of the county and to effectively give notice to the world that one joint tenant has died and the ownership is now in the survivor(s) name.
This is normally done by the survivor filing an Affidavit of Surviving Joint Tenant.
This affidavit affirms the death of one party and the survivorship to title of the other party. This affidavit, along with a certified copy of the death certificate, is then filed in the county records. The affidavit includes specific description of the land including specific references to the deed that originally conveyed the property.
In this way, the termination of joint tenancy and the identification of the new owner are documented in the county records for all future title research.
• Practical Application: If a husband and wife have a small estate that includes real estate, they may choose to own the home and property as joint tenants with right of survivorship.
Upon the death of the first spouse, ownership passes automatically to the survivor, no probate is required, if the survivor files an appropriate affidavit with the county.
The result – the survivor now owns the property as an individual and can now sell or deed the property to others including the children without the need of a probate action to clear the title. That survivor, however, must utilize some technique to insure their sole ownership can pass to their designated person after their death.
(B) Tenancy in Common. Ownership as a tenant in common provides an undivided interest in the whole property, i.e., an undivided one-half, one-third, etc. This interest stands on its own and can be bought and sold.
This form of title is appropriate when two or more people intend to keep their title separate from the other at death. In practice, this ownership is somewhat theoretical in that an undivided interest provides a partial ownership on the entire property.
Thus, an undivided one-half owner has the right to use the entire property, including the right to benefit from one-half of the rent, lease, or crop share.
When several persons own an undivided interest, the control, usage, and management can become complex and a source of conflict.
• Practical Considerations: Tenancy in common offers a benefit in that the interest is transferable and can be sold or otherwise transferred without affecting the other owners.
However, the value of a partial ownership is reduced because of the potential limitations imposed by other owners.
An interesting problem also exists in a family situation if a husband and wife own their property as tenants in common. If one spouse dies, his undivided interest remains as a part of his estate.
The result? His estate must be probated to provide a clear transfer of title to the surviving spouse or to other heirs. This creates an expense for the survivor that could have been avoided if another form of ownership were used.
Consideration of such factors is an essential part of successful estate planning. It is always best to plan in advance than to react after the fact.