A Single-Minded Approach: Estate Planning for the Unmarried
December 18, 2014The Pros & Cons of Co-Owned Accounts (JTWROS)
May 18, 2015There is a common misconception that all real and personal property will pass through an individual’s estate upon his or her death.
Though, some assets avoid the probate process altogether depending on how the property is titled. In other words, the titling of an asset establishes ownership.
Below are a few methods for establishing ownership of real property, such as houses and land, and personal property like bank accounts, cars, and other items.
Sole Ownership
The property is owned entirely by one person.
When the owner dies, ownership can pass to another via beneficiary designation or into the decedent’s estate. The person(s) entitled to inherit is controlled by the accounts titling, the decedent’s Last Will & Testament or, if none exists, by statute.
Tenants by the Entirety (T/E)
Some states, including Maryland, have a form of joint ownership that only occurs when the property is owned by a husband and wife, with each owning a one-half interest.
T/E evolved from English common law and creates a legal fiction. In a T/E, when the first spouse dies, the surviving spouse owns the property in his/ her name alone. Such ownership treats a husband and wife as one owner rather than two individuals. As a result, both spouses’ signatures are required to sell the property. (One spouse cannot act independently of the other).
This can also protect the assets owned by married persons from the debt of an individual spouse. For example, if the wife defaults on a car loan in her name alone, the creditors cannot normally go after the house titled in both the husband and wife’s names. There are certain exceptions to the above scenario including when the U.S. Supreme Court upheld the IRS seizing property owned by spouses as T/E, even when only one spouse has an unpaid tax debt or lien.
Tenants in Common (T/C)
In Maryland, T/C is a form of joint ownership where each party individually owns their share of the property without any rights of survivorship.
If one co-tenant dies, his or her ownership interest passes into their estate, and not to the surviving owner(s). Under T/C, owners can also possess unequal shares, such as a 65/35 split. In Maryland, unless the owners are married or the asset is titled to establish JTWROS (see below), ownership of property is presumed to be as tenants in common.
Joint Ownership With Rights of Survivorship (JTWROS)
When two or more individuals equally own an asset together, it is classified as Joint Ownership with Rights of Survivorship.
However, there is a presumption in Maryland against joint tenancy. The intention to create a joint tenancy must be explicit. Therefore, the asset titling must include language that establishes rights of survivorship for non-married individuals. The significance of this language is that when one owner dies—by operation of law—his or her share is owned by the surviving owners.
It is also important to remember that because each joint owner possesses an undivided right to possess the entire asset, each joint tenant has the right to conduct all business therein.
For more information, contact the Law Firm of Abraham & Bauer.
Planning ahead is a gift to your loved ones!
Mr. Abraham is an experienced attorney and founding member of the Law Office of Richard K. Abraham. The Sparks, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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