Understanding who technically owns the assets you intend to bequeath is one of the most important steps in estate planning. The title reflects the ownership of an asset, and may affect who receives them or pays taxes on them after you are gone.
Types of Asset Ownership and Titles
There are many types of ownership to consider when titling assets. Each ownership type has varying implications for taxation and estate planning purposes.
Sole ownership, or single ownership, is when one person’s name is on the property title. That person has complete ownership (and thereby complete control) of the property. The owner may choose to sell the asset or bequeath it to beneficiaries delineated in their will. If there are no designated beneficiaries on an asset titled with a sole owner, the asset may be subject to probate. Single name assets may pass directly without going through probate through transfer on death (TOD) or payable on death (POD) designations.
Joint Tenancy with Right of Survivorship
The property is co-owned in its entirety with all other owners, with the names of all co-owners (i.e. joint tenants) on the title. When a co-owner dies, their interest in the property doesn’t pass into their estate, but transfers to the remaining owner(s).
Tenancy by the Entirety
Tenancy by entirety (TBE) is like joint tenancy with right of survivorship, but TBE can only exist between married couples. For one spouse to change his or her interest in the property, the other spouse must consent to the change. When one spouse dies, the surviving spouse gets full ownership of the property. Tenancy by the entirety is only available in certain states, so make sure to check with an estate planning specialist if your state allows TBE.
Tenancy in Common
Tenancy in common allows two or more owners to have an interest in a property. Ownership is not necessarily split equally among the co-owners. Instead, co-owners may split the interest disproportionately. Unlike joint tenancy with right of survivorship, tenancy in common allows each co-owner to leave his or her share of the property to beneficiaries upon their death.
Review Your Asset Titles
Keep in mind that all your assets will go to someone in the end. Having your assets titled correctly ensures that your assets go to whom you intend after you die.
If you have questions about your assets and titling options, contact a Fifth Third estate planning specialist.