MN Wills & Trusts | Different Ways to Hold Title to Property

Different ways to hold title to property

A recent article in the Washington Post involved a letter from a reader asking whether she and her husband needed to create a trust to ensure that, in the event of eithers death, the other would be guaranteed to take ownership of the family home seamlessly. The author of the article dove into the issue of the trust, but quickly glossed over the underlying issue of property ownership. Though trusts can be useful in a multitude of circumstances and should be discussed with your estate-planning attorney, they may not always be necessary depending on the way in which title to your property is held.

What options are there? And what is the legal significance of each type? To learn more, keep reading.

Married Couples

The first way of holding title to real property (meaning real estate) is to keep it in you or your significant others name. Under this approach, the property is legally owned by the one person whose name is on the title. This means even if youre married the property is legally yours, not jointly held. This is a perfectly acceptable way of owning property, but there are a few important downsides. First, if something happens and youre incapacitated, theres no one else empowered to make decisions about the property.

Even with a will in place naming your spouse or another loved one as the eventual recipient, this does not come into play during incapacitation. Instead, its likely that a court would get involved and appoint someone to oversee the property, a potentially cumbersome process. Another downside is that in the event of your death, the house will almost assuredly pass through the probate system, something that costs money and wastes time.

Joint Tenancy with Right of Survivorship

A second way of holding title to property is as joint tenants with right of survivorship (often abbreviated as JTWROS). JTWROS is the most common way that property is held by married couples and its popular for a reason. With JTWROS, you and the other owner (usually a spouse) are seen as co-owners. You each hold power over the property and, in the event the other co-owner dies, full ownership transfers automatically to the surviving owner without the need for probate. This saves both time and money and seems inherently fair when considering a jointly acquired piece of real estate. That said, there can be problems with this too. For one thing, by taking on a co-owner you give up control. Though this may be fine between spouses, another occasion where JTWROS is used is by parents and their adult children. If the child gets into debt or other legal troubles, the co-ownership could endanger your home as he or she would be considered a rightful owner and thus his or her ownership is subject to claims by creditors.

Tenancy in Common

Tenancy in common is yet another way of holding title to real property. Tenants in common exist when multiple owners each own a percentage of a property. Each owner can do what he or she wishes with their share, including leaving their share to their heirs. Though this allows multiple people to jointly own a single piece of property, it differs in a crucial way from JTWROS. In a tenancy in common, if an owner dies, the shares of that person do not automatically revert to other owners. Instead, the shares of the one owner will be distributed to the owners heirs, meaning that ownership likely continues to stay divided rather than unifying after death. This can make it difficult if not impossible to make decisions about property when there are multiple owners forced to reach agreement.

Tenancy by the Entirety

A fourth way of holding property is known as tenancy by the entirety. This is only allowed in some states and typically reserved for married couples. Like with joint tenants, if one spouse passes away his or her ownership passes to the other spouse. Also like joint tenants, this passage occurs automatically and without the help of probate. A difference with tenancy by the entirety is that one spouse is unable to transfer his or her share of the ownership to another person unless the other spouse signs off. One benefit of this is that it protects the property from potential claims from outsiders, including creditors.

Finally, another way of holding title to property occurs in only nine states across the U.S. where community property is a recognized legal concept. In these states, each partner owns half of the real property. Just like with a tenancy in common, each of the owners is able to distribute his or her half of the property to someone else, unless the community property is held with the right of survivorship.

Minnesota Estate Planning Lawyers

An experiencedMinnesota estate planning lawyercan help walk you through theprobate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contactJoseph M. FlandersofFlanders Law Firmat(612) 424-0398.