tenants in common

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Unmarried Couples and Planning

For unmarried couples, having an estate plan might be even more important than for married couples, especially if there are children in the family. The unmarried couple does not enjoy all of the legal protection afforded by marriage, but many of these protections can be had through a well-prepared estate plan.

A recent article “Planning for unmarried couples” from nwi.com explains that in states that do not recognize common law marriages, like Indiana, the state will not recognize the couple as being married. However, even if you learn that your state does recognize a common law marriage, you still want to have an estate plan.

A will is the starting point of an estate plan, as is a revocable trust, and for an unmarried couple, having it professionally prepared by an experienced estate planning attorney is very important. An agreement between two people as to how they want their assets distributed after death sounds simple, but there are many laws. Each state has its own laws, and if the document is not prepared correctly, it could very easily be invalid. That would make the couple’s agreement useless.

There are also things that need to be prepared, so an unmarried couple can take care of each other while they are living, which they cannot legally do without being married.

A cohabitating couple has no right to direct medical care for each other, including speaking with the healthcare provider or even seeing their partner as a visitor in a healthcare facility. If a decision needs to be made by one partner because the other partner is incapacitated, their partner will not have the legal right to make any medical decisions or even speak with a healthcare provider.

If the couple owns vehicles separately, the vehicles have their own titles (i.e., the legal document establishing ownership). If they want to add their partner’s name to the vehicle, the title needs to be reissued by the state to reflect that change.

If the couple owns a home together, they need to confirm how the home is titled. If they are joint tenants with rights of survivorship or tenants in common, that might be appropriate for their circumstances. However, if one person bought the home before they lived together or was solely responsible for paying the mortgage and for upkeep, they will need to make sure the title and their will or revocable trust establishes ownership and what the owner wants to happen with they die.

If the wish is for the surviving partner to remain in the home, that needs to be properly and legally documented. An estate planning attorney will help the couple create a plan that addresses this large asset and reflect the couple’s wishes for the future.

Unmarried cohabitating adults need to protect each other while they are living and after they pass. A local estate planning attorney will be able to help accomplish this.

Reference: nwi.com (Jan. 24, 2021) “Planning for unmarried couples”

 

What is Tenancy by the Entirety?

Choosing an ownership structure for real estate is is an important decision. As a result, it is crucial to understand the options.  Among them, tenancy by the entirety is an ownership form unique to married couples.  Motley Fool’s recent article entitled “What is Tenancy by the Entirety?” explains that the only owners of the property must be both spouses of a legally married couple. To create a tenancy by the entirety, property would have to be acquired by both husband and wife at the same time.  It is important that they are married at the time of the acquisition.  If, for example, the two persons took title to property jointly and then were married a week later, the property would not be entireties property.

With a tenancy by the entirety, both spouses have an equal, undivided ownership interest in the entire property.  It doesn’t matter what portion of the purchase price came from each spouse. Both spouses also have equal rights, when it comes to actions involving the property, like whether to sell the property. If one of the spouses or owners dies while the property is owned under a tenancy by the entirety, the surviving spouse automatically becomes the sole owner of the home, even if the will of the decedent spouse distributes the property to somebody else.

If there’s a divorce, a tenancy by the entirety can be cancelled. If the divorced spouses continue to own the property, the arrangement will revert to tenants in common. This lets each owner sell or transfer their interest in the property to whomever they want. The property’s ownership structure could also be changed from tenancy by the entirety to another type, if both spouses agree to it.

Tenancy by the entirety has two main advantages for married couples: asset protection and survivorship. Tenancy by the entirety helps protect the property from the debts of one spouse. Creditors can’t attach a lien on a house owned as tenancy by the entirety, unless the debt is in the names of both spouses. Tenancy by the entirety makes the owner of the house a separate legal entity from either spouse. It also avoids a costly and lengthy probate process because title to the home transfers automatically to the surviving spouse upon one spouse’s death.

While tenancy by the entirety is available in Florida, it isn’t available in all states. Some owners also don’t like the fact that each spouse owns a 50% share, even if one spouse paid the entire cost of acquiring the home.

There are a few other ways to own property. Here are some of the most commonly used methods for properties purchased for more than one adult tenant to live in:

Tenants in Common.   This is a type of ownership in which two or more persons or entities owned an undivided interest in property. Unlike tenancy by the entirety, tenants in common do not have to own equal shares of the property, and upon one owner’s death, his or her ownership interest will be distributed pursuant to his will or intestate probate proceedings.

Joint Tenants with Rights of Survivorship (JTWROS).  This is similar to tenancy by the entirety. Like tenancy by the entirety, JTWROS-held properties also pass to the survivor in the event of one spouse’s death. However, JTWROS isn’t limited to married couples, and there can be two or more owners. Each one has an equal interest in the property, but unlike tenancy by the entirety property, each owner has the right to sell or transfer their ownership interest to another. Another difference is that JTWROS owners aren’t considered to be a separate and single legal entity—each owner’s creditors can go after the property, even for debts that are owned by a single debtor spouse.

Sole Ownership. With sole ownership, just one person holds title to a property. It is often used when a single individual purchases a home. However, it can also be used if a married couple buys a home, but only one spouse will legally own it. A big advantage of sole ownership is its simplicity—the owner is able to make any decisions about the property on their own. However, transfer of ownership when a sole owner dies can be more complicated than any of the other ownership structures above.

Tenancy by the entirety has several key benefits for married couples, in states where it’s permitted. Review these with an experienced estate planning attorney before deciding.

Reference: Motley Fool (Aug. 23, 2020) “What is Tenancy by the Entirety?”