Joint Property Ownership Can Be An Estate Planning Tool
When it comes to estate planning, many of us think of going to an estate planning attorney and doing up an entire estate plan. But many people don’t realize that one part of estate planning happens before you actually make an estate plan: it’s when you buy property.
That’s because buying a home or real property can be an estate planning tool, considering the many ways that multiple people may own property. There are a lot of ways that multiple people can own property, and while somewhat similar, there are slight differences between them that give them differing benefits from an estate planning standpoint.
A life estate is a very effective estate planning tool. Although a form of joint ownership, this is not equal ownership.
The primary owner has almost full control over the property, including the right to live in it and make decisions about it. The other person, called a remainderman, generally has no say over how the property is run, used or managed—the remainderman only has a right to inherit the property when the other person passes, and may have to consent to a lien on the property (for example, if a second mortgage or home equity loan was needed).
Because the property passes automatically to the remainderman on death, it avoids probate, making it an effective estate planning tool.
Joint tenancy is more like the joint ownership that you probably are familiar with. The good is that both parties have the ability to own and control and even use the property, as well as to divide the profits. But that also means there is a higher likelihood for disputes or arguments-especially if property is being used to generate money, or a business, like a rental.
Similar to a life estate, a joint tenancy avoids probate, because of what is known as a right of survivorship. That means that when one joint tenant dies, the other tenant inherits the property automatically, without the need for probate court.
Tenants in Common
Tenants in common is similar to a joint tenancy, except that when one co-owner passes away, the other owner does not automatically inherit that owner’s share of the property. The deceased co-owners ownership interest instead passes to whomever the deceased designated (or, if there was no will or other estate document, it would pass to whomever the state intestacy laws say gets the property).
This can be a good vehicle if you would prefer that your co-owner not get 100% of the property upon your passing—instead, you may want your co-ownership of the property to pass to a family member.
Just remember if you opt for a tenant in common situation, you must account for your ownership interest in your estate documents.
Call the Torrance will and estate attorneys at Samuel Ford Law today to see what you can do to avoid the probate process, and take care of your loved ones in your estate plan.