Many people do not understand the implications of how the method of holding title to property impacts inheritance rights and their estate. However, understanding the type of title you hold is essential to properly completing your estate plan. The following is a list of issues to consider regarding how your property title will affect your spouse, children, and other legal heirs when you die:1. How will your heirs or beneficiaries be affected if they have to share ownership of property they inherit?2. Will your
heirs and beneficiaries be able to assume payments for any mortgages or liens on the property?3. If you are leaving the property to more than one person and know that one person will want to sell his share while another will want to keep the property, is there a way to address this problem in your estate plan?4. If you are leaving rental property, a farm or a business to more than one person, do you anticipate either person creating problems that will impact the successful operation of the business, the ability to rent the property, etc.? If so, is there a way to address this potential problem by making changes to your estate plan?5. Will your heirs or beneficiaries be willing and able to pay all taxes required to maintain ownership of the property? If not, will the
inheritance of one or more heirs be impacted by another's failure to pay taxes when due?6. Will your executor or trustee be able to easily and quickly locate all your heirs and beneficiaries to settle your estate? This is important for several reasons, including to ensure title to property can be properly transferred and that property tax notices can be delivered, etc. Some estate plans include a Letter of Instruction to ensure this type of information is readily available.7. If you share ownership of the property with others, is there any conflict between your estate plan and how the other property owners plan to use or distribute their interest in the property?After reviewing these issues and carefully considering what might happen if your heirs and beneficiaries inherit property according to how your property is currently titled or based upon your current estate planning documents, you may be left wondering what to do.Fortunately, the issues outlined above are very common and there are several estate planning strategies you can use to address them. To learn about steps you can take, review our free Estate Planning Guide for Parents.
Methods of Holding Title to Property
There are many different ways to hold title to property. The exact terms used to describe each form of title vary from state to state. For estate planning purposes, the following is a list of the most common ways to hold title to property:1. As sole owner2. Community property 3. Community property with right of survivorship 4. Tenants by the entirety 5. Joint tenants
6. Tenants in common 7. As trustee of a trust, such as trustee of a living trust 8. Life estate or life tenantNote: Some of the above methods of holding title may not be available in all states. To learn your options for holding title, consult an attorney licensed in the state where the property is located. See finding an attorney.
Title to Property and Your Estate Plan
Estate planning mistakes are often the result of failing to understand who has the legal right to inherit your property. In the case of real property, many people assume they have the right to leave their interest in the property to whomever they want, simply by making a will or living trust. However, the property owner can only bequeath or grant the rights he possesses. If you share ownership of property with someone else or another name is on the deed, it is important to understand how you hold title before leaving instructions about how you want your property distributed. If you live in a community property state, consult a lawyer to learn exactly what ownership rights you have in all property in your estate versus the ownership rights of your spouse or partner.
Who Has the Right to Inherit Your Property?
When you plan your estate, how you hold title to property is one of the most important factors in determining whether your final wishes will be carried out. For example, suppose you purchase a house with your spouse or partner and take title as tenants in common rather than joint tenants. Upon your death, your spouse or partner may have to contend with the heirs who inherit your tenants in common share, rather than owning the entire property by right of survivorship.Suppose you make a will leaving your share of the house you own with your new spouse to your children from a prior marriage. However, because you own the house with your new spouse as joint tenants, your children don't inherit anything because the surviving joint tenant owns the entire property. These types of estate planning mistakes are made every day and have devastating effects on surviving family members.
See Estate Planning in Subsequent Marriage.
To ensure that upon your death your spouse, partner, child, parent or other beneficiary will inherit property according to your last wishes, consult an attorney for help with estate planning. Review property deeds, titles, tax bills, and account registrations to ensure any necessary changes are made to ensure your property is distributed in the manner you intend.
Estate Planning Deeds
How you hold title to property is an extremely important part of ensuring your property passes to your desired beneficiaries. There are certain types of deeds that can be used to carry out your estate planning objectives. Certain types of deeds provide additional benefits, such as avoiding probate. To learn more about these types of deeds and common mistakes in making deeds as part of an estate plan, see
estate planning deeds.
Who Inherits If You Die Without a Will?
If you do not currently have an estate plan, you may be curious about who will inherit your property if you die without a will or living trust. In some cases, this is determined by how you hold title to property. See
dying without a will.For example, if you own property as joint tenants, the surviving joint tenant becomes the sole owner of the property when you die, meaning your
heirs do not inherit your interest in the property. This may be what you want if you own property with your spouse, partner or child. However, if you hold title as joint tenants with your spouse, but want your children to inherit your interest in the property, this method of holding title would not produce your desired outcome.
Taking title as joint tenants can create estate planning problems if you want to leave all or a portion of the property to your children, especially if you hold title as joint tenants with someone that is not the parent of your children.If you are the sole owner of property and the title is in your name only, but you die without a will or living trust, have you thought about who will inherit your property? In this situation, inheritance rights are determined by state laws also known as laws of intestate succession. You may be surprised which heirs will end up as the new owners of your property. If you have a child, parent or sibling you would not want to inherit your property, you may need to make a will or trust to ensure your property does not pass to such person based on their status as a legal heir under applicable state laws. See disinheriting an heir.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated May 13, 2020.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
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