Provided By Savina Nikolova, Senior Associate at The Larson Law Firm, LLC
There’s satisfaction to be had in owning something valuable. In many ways, the property we possess serves as a testament to the sweat equity we apply to our daily lives. Property consists of rights and interests a person holds in anything of value that is capable of being owned. Real property (real estate) is land and everything permanently attached to it such as buildings, fences, pavement, storm drains and tress. Personal property covers all other assets, even the intangible ones.
Ownership is a surprisingly nebulous term. There are several different types of ownership, each with a unique set of features. Understanding the characteristics of each type of ownership is crucial for formulating a proper estate plan.
Types of Ownership
- As the sole owner of a property, you can sell, mortgage or gift the property at your own discretion and are entitled to all of the income. You can also designate an heir in your will who will inherit the property if anything were to happen to you. The only exception would be a life estate, where a person’s interests cease when the owner dies.
- Joint Tenancy with Right of Survivorship (JTWROS): This is common form of joint ownership between spouses, although non-married owners can also qualify. In this scenario if one of the owners dies, the property is automatically transferred to the surviving owner by operation of law.
- Tenancy in Common: A form of ownership between two or more persons in which each owns part interest in the whole property. The proportion of ownership can be of any combination but it must be officially stated. Any income generated from the property is split based on these fractional shares. Each party can legally sell their share without the other party’s approval or consent. Unlike JTWROS, rights do not pass from one owner to the other(s) at death.
- Tenancy by the Entirety: This form of ownership is similar to JTWROS in terms of survivorship but provides far more asset protection. However, it may only exist between married spouses. This permits spouses to own property as a single legal entity by giving each spouse an equal and undivided interest in the property. Consent from the other spouse is always required before making the decision to sell or rent the property. It’s important to note that Tenancy by the Entirety is not recognized in all states.
- Community Property: Another form of ownership that can only be held between spouses. It generally does not include property acquired prior to marriage or to property acquired by gift or inheritance during the marriage. These laws generally presume that all property owned by a married couple while residing in that state is community property regardless of titling. However, it’s possible to have a written agreement to the contrary. Currently, only 10 states (Arizona, California, Nevada, New Mexico, Idaho, Texas, Washington, Louisiana, Wisconsin, and Alaska) recognize some form of community property laws, which should be considered if you plan on relocating to another state.
When planning your estate, it’s important to be informed about the laws controlling transfers at death. You can make things a lot less complicated for your grieving loved ones by seeing that your assets are automatically transferred to their respective beneficiaries without having to go through a probate court. An effective estate plan will ease the burden during this stressful time by eliminating the guesswork when honoring last requests. Having property correctly titled and keeping beneficiary designations up to date will do just that.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal advice or services. Please consult the appropriate professional regarding your legal needs.