California Estate Planning Attorney Comments on How to Hold Title to Assets | Law Firm Newswire

California Estate Planning Attorney Comments on How to Hold Title to Assets

Roseville, CA (Law Firm Newswire) April 25, 2016 - It is imperative that people understand the consequences of holding title to assets and that the ways in which the owner holds title can greatly impact the transfer of the property upon the owner’s death.

Some individuals choose to add an agent to an account when they are depending on that person to help with the management of their finances. This method does not provide the agent with any ownership rights or name the agent as a beneficiary. However, it grants the agent permission to act on behalf of the owner with respect to the assets during the owner’s lifetime.

One method that allows the owner to transfer specific assets to a designated beneficiary is transfer on death. The transfer occurs upon the death of the owner and presentation of the death certificate by the beneficiary. The owner names the beneficiary of securities on a form given by the institution, and records a beneficiary designation with respect to real estate with the register of deeds. While the owner is alive, the beneficiary does not possess the right to own or manage the property, but after the death of the owner, the property is transferred to the beneficiary, and does not have to go through probate. Payable-on-death accounts are similar to transfers on death, but usually apply only to bank accounts, including certificates of deposit.

“It is important for people to carefully consider how they wish to hold title to their property so as to preserve their wealth and protect their assets for the benefit of future generations,” said prominent Roseville, California, estate planning attorney David Wade.

Two or more individuals can hold title to the property with a method called tenancy-in-common. Each owner has an interest in the property that is in proportion to the amount of each person’s contribution. Upon the death of one owner, that owner’s interest will be transferred to the beneficiaries named in the owner’s estate plan.

Another form of ownership in which title is held by two or more persons is joint tenancy. The joint tenants own the property equally irrespective of their contribution. Joint tenancy differs from tenancy-in-common in that joint tenancy creates a right of survivorship. Upon the death of one owner, the property is transferred to the survivor. This transfer is not governed by an estate plan, and is not required to go through probate.

However, if the remaining owner dies, and does not add another owner, or if the two owners die simultaneously, the property will most likely be required to go through probate prior to being transferred to the heirs. In addition, when the original owner adds an owner, there is a loss of control. The signatures of both owners are required to sell or refinance the property. In the event there is a disagreement between the two owners, litigation could ensue. Or if one owner is incapacitated, the court will, in all likelihood, become involved in order to safeguard that owner’s interest, even in cases where the incapacitated owner is the spouse.

Furthermore, an owner is at risk for losing the property to the other owner’s creditors if the debt collectors file a lawsuit and prevail. Another consideration is the existence of gift and/or income tax issues if the two owners are not spouses. Moreover, since a will does not govern jointly-owned property, there could be disinheritance by one owner’s family when the co-owner inherits the deceased owner’s share. For instance, children from a prior marriage are frequently disinherited when a new spouse is the remaining owner.

In California, there is a form of ownership called community property that exists between spouses. Upon the death of one spouse, the property is automatically transferred to the other spouse unless the will states a different result.

However, as with tenancy in common, upon the death of one owner, the surviving owner could have many new co-owners when the deceased owner’s heirs inherit the property. In the event the remaining owner is attempting to sell the property, there may be challenges in arriving at an agreement. And similar to joint tenancy with right of survivorship, other issues concerning incapacity and lawsuits by creditors could also arise.

Tenancy by the entirety is another type of joint ownership that applies to spouses in some states. As with joint tenancy with rights of survivorship, a spouse’s share is transferred upon their death to the surviving spouse, even in cases where the will provides for a different outcome. Therefore, this form of ownership has several of the same risks as joint tenancy, such as inadvertent disinheritance should one spouse become incapacitated. One disadvantage of tenancy by the entirety is that neither spouse has the ability to transfer their share to another person without approval from the other spouse. Both joint tenants with rights of survivorship and tenants-in-common have the ability to make this transfer.

The most effective method of holding title to property is the use of a revocable living trust. Title to real estate and other property can be held in the name of the trustee. In most cases, the owner will be the trustee and will thus maintain control of the property. The owner also has the ability to purchase, sell and refinance real property. In the event the owner becomes incapacitated, the successor trustee can act on behalf of the owner. Since title is not in the name of the owner, court intervention is unnecessary. If the owner is married, both spouses can be co-trustees, and the successor trustee would assume responsibility only after both spouses become incapacitated or die. The property will then be distributed without probate and in accordance with the instructions outlined in the trust.

Wade Law Offices
2400 Professional Drive
Suite 100
Roseville, CA 95661
Phone: (800) 835-2634

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