Estate Planning FAQ 3
What are the different forms and problems created by property ownership Monmouth County?
Most people, when they speak about joint property, are referring to assets owned by a husband and wife or by a parent and child with rights of survivorship, meaning that such assets would become wholly owned by the survivor upon the death of one of the owners. However, that is only one of the ways that property can be owned by more than one person. In New Jersey, when a husband and wife own real estate together they generally are presumed to hold title as tenants by the entirety. There is a unique benefit this form of ownership provides – if a creditor obtains a judgment against one spouse the creditor cannot levy against tenancy by the entirety property or force it to be sold to satisfy the judgment. From an estate planning perspective, tenancy by the entirety means that when one spouse dies the survivor automatically becomes the sole owner of the property. In New Jersey, tenancies by the entirety only apply to real estate. However, in other states personal property may be included. For example, in Florida bank accounts may also be held in tenancies by the entirety. The classification of persons entitled to tenancy by the entirety status in New Jersey has been changing as our laws relating to domestic partnerships and civil unions undergo modification. It is likely that persons in those types of relationships, when registered under state law, will also be entitled to tenancy by the entirety status for property they own together.
In addition to tenancies by the entirety, both real estate and personal property such as bank accounts and securities may be owned by two or more people as joint tenants with rights of survivorship. Joint ownership by persons who are not married – say a parent and child or a brother and a sister, is not presumed and ownership must be specifically registered to establish a joint tenancy with rights of survivorship or “jtwros”. Although not common, more than 2 people can be joint tenants with rights of survivorship meaning that the last surviving joint tenant will eventually become sole owner.
Another form of ownership by two or more persons is called tenancy-in-common. In this format each person owns a share of the property, not necessarily an equal share, and when an owner dies his or her share passes to that owner’s heirs, not to the surviving owners. In a tenancy-in-common situation the death of one of the owners sometimes creates problems if the property involved is not readily divisible and one party wants to sell or dispose of it but the other wants to continue the status quo. In extreme cases where the parties are not able to reach agreement they may wind up in court with an action either to divide the property, called partition, to have one side buy out the other or to have the property sold to a third party.
It is important to understand the implications of these forms of ownership because the way that property is owned can be at odds with a person’s estate planning goals. Take the case of a parent who titles some of her bank accounts as joint tenancy with rights of survivorship with one child but has a Will that provides that all her assets are to pass to children equally. In that situation property law trumps the Will and the bank accounts will pass to the one child who is the surviving joint tenant and only the remaining assets get divided equally among all of the children. The same result applies where there are accounts made payable upon death to fewer than all beneficiaries. The accounts with such designations will pass to the named beneficiaries and the person’s Will would only govern how accounts and assets without such provisions are to pass upon the parent’s death. Frequently, a mother or father will add children onto accounts as joint owners to enable them to handle the parent’s finances if he or she later becomes unable to do so. However, a simpler method and one which would avoid possible inequity among all children would be to grant the child a power of attorney, not to name him or her as a joint owner with survivorship rights.
Bottom line: The way in which assets are owned may be as important as an individual’s documents in effecting distribution of his or her assets upon death. It is, therefore, important to make sure that assets are titled consistent whatever provisions may be included in a person’s Will or Trust Agreement.
Call (732)-972-1600 today to speak to one of our skilled Estate Planning Attorneys. Located in Manalapan (Monmouth County, NJ), Cranford (Union County, NJ) and Midtown Manhattan (New York, NY); Drescher & Cheslow represents clients throughout the State of New Jersey & New York including but not limited to Mercer, Middlesex, Monmouth, Essex, Somerset, Morris, Hudson and Ocean counties.
Ten Frequently Asked Estate Planning Questions
First: What happens if someone dies without a Will?
Second: What is probate and how much time and money does it cost?
Third: What are the different ways property can be owned and what problems can these different forms of ownership create?
Fourth: Must a parent treat all children equally?
Fifth: How should property be left for someone unable to manage it?
Sixth: Who should be named Executor or Trustee?
Seventh: What about taxes?
Eighth: What about lifetime gifts?
Ninth: How can clients safeguard their affairs in the face of physical or mental infirmity?
Tenth: How are health care decisions to be made if a person becomes unable to express his or her wishes?
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