I.          Title Vesting, Tenancy and its Consequences:

Tenancy Options

Tenants in Common

Joint Tenants

Tenancy by the Entirety

 Tenants In Common

“The Default Tenancy” – If John Doe and Jane Doe, Husband & Wife, take title with no Tenancy shown on Deed, property vesting will default to Tenants in Common.

Consequence: At the time of death of one spouse, 50% of property goes to existing spouse and the remaining 50% goes to heirs and devisees of the deceased.

When to use Tenants in Common.         Two friends buy a house and want to keep their interest separate.

Joint Tenants

Consequence: If two people own property as joint tenants, the property automatically passes to the other person at the time of the other’s death.

When to use Joint Tenants. When family members or unmarried couples, who own property, wish that the property pass to the other upon his/her death.

Caveat. Joint Tenancy could be broken without the knowledge of the other owner. Judgment holders could attach their judgments to the property and force a sale through a partition law suit.

Tenants by the Entirety 

Consequence:   If two people that are husband and wife own their principal residence as Tenants by the Entirety, the property will automatically pass to the other spouse. Also, judgment holders cannot force a partition law suit.

When to use Tenants by the Entirety.     In all cases that a husband and wife take title to their principal residence in their own names.

Benefit: The other spouse cannot break the tenancy without the other’s consent. Tenancy provides protection from judgment holders and the other spouse.

Note: This is a relatively new law.

Tenancy Issues.

Example One. Husband and Wife own property jointly and spouse is sued and found liable, the home could be subject to attack.

If husband and wife titled vesting to Tenants by the Entirety, home would be safe from attack.

Note:    Judgment would still attach, and would need to be paid off if home is sold; transferring title to Tenants by the Entirety for the purpose of protecting the home from legal action is not upheld in the Courts.

Example Two. Dad quit claims property to husband in 1980. Husband and Spouse use property as their marital residence through husband’s death in 2000. Husband and Wife have 6 children, one son deceased and has 2 minor children. Wife wants to sell.

Consequence. Wife inherits a total mess. Because property was owned solely by the husband, property passes to his heirs, which include: Wife, Minor Children and Minor Grand Children of  deceased Son.

Solution. The solution is complicated and will be expensive to clear up. Guardian ship needs to be established for the Minor Children and Grand Children.

II         Trusts

Land Trust or Private Trust?

What is the Difference?

a.         Land Trust. Pre-established agreement with trustee, often times a Bank or Title Company.  Difficult for your ownership to be discovered through public records search.

b.         Private Trust.    An agreement tailored to your needs and amendable as your life circumstances change.

Cost of Setting up a Trust.   

Land Trust has a minimal set up cost, but there is an annual maintenance fee.

Private Trust costs more to set up, but it is tailored to your needs and does not carry a maintenance cost.

Which one to pick. Depends on your end goal and estate planning needs. Both have its advantages and disadvantages.

Caveat. Trusts do not always protect the property from judgment holders.

Conclusion.

Proper estate planning begins at the time you purchase your home. Simple and inexpensive legal assistance could save you time, frustration and money.