Forms of Property Ownership

03/15/2011

I recently met with a client regarding their estate plan and when we were reviewing their assets I asked them how their property was owned and they gave me a blank stare.  I thought it might help others to review the different ways property can be owned.   Here is a summary of what each type of ownership means for you and your family.

  • Individual Ownership.  Individual ownership refers to property that's owned by one individual solely, without any other owners or a beneficiary designation. When you die, property owned in your individual name will usually have to be probated to get it out of your name and into the names of your loved ones.
  • Joint Ownership.  Joint ownership refers to property owned by more than one individual.  There are numerous types of joint ownership, including:
    • Joint Tenancy With Right of Survivorship. With this type of ownership, all of the owners hold an equal right to the property. In other words, any owner can withdraw the funds from an account without the knowledge or permission of the other owners. However, with jointly owned real estate, in most states the property can't be sold or mortgaged without the consent of all of the owners. When one joint owner dies, ownership of the property automatically passes or vests in the surviving joint tenants without the need for probate. 
    • Tenancy by the Entirety.  This is a type of joint ownership with rights of survivorship that's recognized in some states and can only exist between a husband and wife. Either spouse can withdraw the funds from an account without the knowledge or permission of the other spouse. However, with real estate, in most states the property can't be sold or mortgaged without the consent of both spouses. When one spouse dies, ownership of the property automatically vests in the surviving spouse without the need for probate. Most married couples probably own the bulk of their assets as tenants by the entirety (unless they have engaged in estate planning and segregated their assets).
    • Community Property.   This is a type of joint ownership that's recognized in some states and can only exist between a husband and wife. Each spouse's ownership rights in community property are set by specific state laws.  Missouri is not a community property state.
    • Teancy in Common.  With this type of joint ownership, each individual "tenant in common" owns a specific percentage of the property and can withdraw, mortgage, or sell his or her own separate piece of the property. When a tenant in common dies, his or her share of the property passes to his or her own beneficiaries and not to the surviving tenants in common.
  • Title By Contract.  Title by contract covers payable on death (POD), transfer on death (TOD), and in trust for (or ITF) accounts; life insurance; retirement accounts including IRAs and 401(k)s; annuities; and Revocable Living Trusts. The owner of the property has full control of it during life, but after death the property passes outside of probate to the beneficiaries designated by the owner.