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Judging by the number of folks charged with driving under influence I am guessing the penalty is rather light. Of...

Joint-ownership property titling can avoid costly probate process

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Thanh Ngo

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By Thanh Ngo

Sunday, December 2, 2018

Titling assets properly is the very first step to protect your assets and ensure that they can be passed onto your loved ones efficiently, especially when you share ownership of the assets with another person. Different property titling methods can entail different probate consequences. In this article, I describe the five common methods of joint-ownership property titling.

1. In joint tenancy, two or more persons own equal shares of a property. The owners do not have to be related or married to each other. When the asset is owned jointly by spouses, the asset is passed onto the surviving spouse upon the death of the other spouse.

However, contrary to one would expect, when the asset is owned jointly by unmarried individuals, the entire value of the asset is included in the deceased’s estate and is subject to probate. Therefore, joint tenancy might not be the best property titling method if you want to share joint ownership with somebody other than your spouse.

Furthermore, if one of the owners fails to honor his/her financial obligations, the asset can be subject to the pursuit of the creditor(s) up to that owner’s respective ownership percentage.

2. Tenancy in common is similar to joint tenancy in many ways. The key difference between joint tenancy and tenancy in common is that the relative ownership percentages of the tenants in common may differ.

One owner can own 25 percent of the asset while the other can own the remaining 75 percent. If one tenant in common deceases, the percentage of his/her ownership in the asset is included in the estate and is subject to probate.

3. Joint tenancy with rights of survivorship (JTWROS): The right of survivorship differentiates JTWROS from joint tenancy and tenancy in common. Upon the death of one owner, his/her share of the ownership is transferred to the surviving joint owner automatically by operation of law without going through probate.

Each joint owner has the right to transfer or sell his/her interest in the property without the consent of the other joint owner(s) and thus might destroy the JTWROS status and consequently might convert a JTWROS into a tenancy in common.

4. Tenancy by entirety is a JTWROS only between spouses. However, different from JTWROS, neither spouse may transfer or sell their interest without the consent of the other spouse. Tenancy by entirety provides better protection from the creditor(s) against one spouse than a JTWROS because the property is not owned by either the husband or the wife but by the marital entity.

5. Community property is recognized in the states of Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Married couples own an equal and undivided interest in all properties accumulated during the marriage.

Each spouse owns half of the value of the community property. Either spouse has the right to transfer or sell one half of the property. Upon the death of one spouse, one-half of the value of the community property is included in the probate estate and gross estate of the deceased spouse.

Being aware of different methods of joint-ownership property titling and choosing the right method from the onset can help avoid subsequent costly probate process.

Thanh Ngo, is staff member of the Department of Finance – College of Business East Carolina University.

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