Ownership Interest in Real Estate and Its Effect on Estate Planning

As a general rule, individuals own real estate property as tenants-in-common unless the deed specifically states that the property is owned as joint tenants. If the property is owned as joint tenants, the surviving “tenant” automatically receives 100% of the property interest upon the non-surviving “tenant’s” death. If the property is owned individually as tenants-in-common, then probate needs to be established in order to lawfully transfer the interest in the real property. Furthermore, if there is a transfer-on-death deed that transfers the property, the transfer on death deed trumps any contrary transfer in a will. The person entitled to the real property upon a decedent’s death can make a significant difference in estate planning.

Hypothetical 1: Elmer and Fudd are in a committed relationship with each other. Elmer owns the home and Fudd moves in. Elmer and Fudd refinance Elmer’s home and are listed as joint tenants on the deed. Elmer dies. Elmer’s kids are upset when they find out that Fudd is a joint tenant on the deed because Fudd did not pay the mortgage.

Since Fudd is listed as a joint tenant, the real property will transfer to Fudd as a matter of law. Probate will not need to be commenced for the transfer to occur. Instead, Fudd records an Affidavit of Survivorship with real property records.

Hypothetical 2: Elmer and Fudd are in a committed relationship with each other. Elmer owns the home and Fudd moves in. Elmer and Fudd refinance Elmer’s home and are listed as tenants-in-common on the deed. Elmer dies without a will.

Elmer’s kids are now 50% owner of the property with Fudd who is the other 50% owner. Probate will need to be commenced for Elmer’s one-half share of the property to be transferred from Elmer to his kids. Elmer’s kids are not happy to co-own property as tenants-in-common with Fudd.

Hypothetical 3: Elmer and Fudd are in a committed relationship with each other. Elmer owns the home and Fudd moves in. Elmer dies without a will.

Fudd is upset when he has to move out of the house because he is not an owner of the property and he was not a beneficiary named in the will. Instead, Elmer’s kids will be the beneficiaries of the property. Probate will need to commence for the property to be lawfully transferred to Elmer’s kids.

Hypothetical 4: Elmer and Fudd are in a committed relationship with each other. Elmer owns the home and Fudd moves in. Elmer dies. He executed a will leaving everything to his kids. However, Elmer also executed and recorded, prior to his death, a transfer-on-death deed transferring the property to Fudd upon Elmer’s death. Elmer’s kids are upset when they find out that Fudd is the beneficiary of the home.

The real property will automatically transfer as a matter of law to Fudd pursuant to the transfer-on-death deed.

Spangler and de Stefano, PLLP assists individuals, business owners and their families with estate planning, business succession planning and elder law.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.