For many people thinking about an estate plan, establishing arrangements for high-value assets is their main priority. The home where they live could very well be the largest asset they intend to pass on to their loved ones when they die.
People can address real property in their estate plans in several different ways. Sometimes, the way that they hold title can influence estate planning arrangements. Many spouses or romantic partners living together either hold title as joint tenants or tenants in common. Either of these forms of vesting can have a direct impact on estate planning needs. What separates joint tenants from tenants in common?
Joint tenants inherit each other’s interest
The way that people hold title to their homes establishes their legal right to the property during their lives and influences what happens to their ownership interest when they die. For many people, the person that they live with is the main beneficiary named in their estate plan.
They intend to have their spouse, close friend or romantic partner who lives with them inherit their ownership interest after their passing. In such scenarios, taking title as joint tenants can be the best option.
Joint tenants have a right of survivorship that allows the other owner’s interest to transfer directly to them after their passing. They become the sole owner of the property without the home passing through probate court first.
Tenants in common, on the other hand, maintain separate ownership interests in the property. When one party who holds real estate as a tenant in common dies, the other tenant does not inherit their interest in the property.
Instead, their heirs or chosen beneficiaries inherit their interest in the property. Two unmarried romantic partners might take title as tenants in common. Each owner’s children could then inherit their interest in the property after their passing.
How property owners hold title plays a major role in establishing property rights when they die. Changing how people hold title is one of several estate planning strategies that can help keep real property out of probate court. Those who understand the different options available for high-value assets may create functional estate plans that more effectively protect their loved ones and ensure the right people assume ownership of their most valuable resources.