The form of property ownership is very important in estate planning.  It determines how and to whom the property passes at the death of an owner, and the extent to which the value of this property is included in the deceased owner’s gross estate for federal estate tax purposes. 

A person who owns property solely and outright enjoys the full rewards, and responsibilities, of property ownership.  Assets owned by a person outright may pass under the property owner’s will, if he or she has one.  The will gives that person the opportunity to spell out his or her specific plans for the distribution of assets after death. 

If two or more persons own property jointly, estate planning considerations may become more complex. 

For property owned as joint tenants with rights of survivorship, two or more persons own property jointly, each with an equal interest in the property.  The property may be real estate or any kind of personal property.  Assets owned as joint tenants with right of survivorship pass automatically to the surviving co-owners upon an owner’s death.  As a result, the decedent’s will has no effect upon the transfer of his share of the property. 

By contrast, property owned as tenants in common allows two or more co-owners to hold an unequal interest in the property without survivorship rights.  Thus, when a tenant in common dies, the ownership percentages do not change for the survivors.  Instead, the deceased owner’s interest passes in the manner stipulated in his or her will, or under state intestacy laws if he or she dies without a will.

Married persons have a third option for joint ownership.  A tenants by the entirety designation may only exist between spouses, and only in certain states (Pennsylvania is one of those states).  Like the joint tenants with rights of survivorship, tenants by the entirety enjoy the right of survivorship.  Thus, when one spouse dies, the other becomes the sole, outright owner of the property.  In addition, while both spouses are alive, each owns an equal interest in the property (100%).     

Depending on your estate planning goals, any one of the property designations explained above may be appropriate.  We recommend that you discuss your specific needs with both your estate planning attorney and your financial advisor at Fragasso Financial Advisors to ensure that your accounts are properly titled to suit your needs.  

This article is for informational purposes only and not intended as financial advice. Consult your financial advisor to determine what is appropriate for your situation.
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