Know How Your Assets Are Titled

Good estate planning begins with a determination of how you hold title to your assets. How an asset is titled will determine who gets that asset when you die – even if your Last Will says something entirely different. Since titling of an asset will determine ownership of that asset upon death, a close examination of titling is essential to make sure your estate planning goals are met. Some common types of title are briefly explained below.

Sole ownership is the simplest of the ownership types. It is property with a single owner. The sole owner may make a Last Will & Testament or a Trust directing the asset to anyone they wish upon their death. However, a serious problem may exist if an asset is titled solely in a person’s name and that person is married. The spouse of that person may or may not have a full claim to that property upon the death of the sole owner. This is a common problem in second marriage situations and should be considered carefully.

Tenants by the Entirety is a common way for married people to own real estate together in Virginia, although it may also be applied to personal property. This classification will give married people certain advantages during life. Upon the death of the first spouse, there is normally no probate and the surviving spouse will retain full ownership of the property. The property may also experience a change in the way it will be classified for capital gains tax treatment if the surviving spouse decides to sell the property later. The property loses its classification as tenants by the entirety when the first spouse dies and becomes solely owned property of the surviving spouse.

Joint tenants with right of survivorship, often simply referred to as “joint tenants”, usually exists in Virginia between non-married people. There may be more than two parties in a joint tenancy; I have seen as many six joint tenant owners on a single piece of property! Joint tenancy can often create unintended consequences because of its peculiar and often misunderstood nature. When a joint tenant dies, that person’s interest in the property simply transfers to the surviving joint tenants. The last surviving joint tenant will eventually own the asset completely. If there were only two joint tenants, then upon the death of the first owner, the other owner will become the sole owner of the property. I usually see this when a parent adds a child to a bank account, inadvertently creating a jointly owned account with that child. When the parent dies, the child owns the account, no matter what the parent’s Last Will may say!

Tenants in common is way for multiple individuals to own property wherein each owner’s interest does not extinguish upon death. It is similar to solely owned property in that each owner may do whatever they like with the property in life and at death they can leave their share in the property to anyone they wish. The other owners of the property do not automatically receive the share of the deceased owner as is the case in joint tenancy (above). Property titled this way can create challenges in that the other owners do not usually have any control or influence over who the new owners might be.

Improper titling can have serious implications upon death. A discussion about how your assets are titled and the impact upon your estate planning goals should be discussed with an estate planning attorney you trust.

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