To many people, the term “estate planning” means simply a will or trust to dispose of assets at death. However, the transfer of assets may be affected by a more basic type of planning – property ownership. The basic forms of property ownership in Mississippi (other than a trust) are: sole ownership by one person; tenants in common ownership by more than one person without the right of survivorship; and joint ownership with the right of survivorship. Each form of ownership can accomplish desired goals for management and transfer of assets in a family, but can also yield unintended consequences.
Property (land or other assets) owned by one person as sole owner will be subject to that person’s debts during his/her lifetime and must generally be probated in court to pass those assets to the person’s heirs. While living, the owner has complete control over the asset without consent or signature of anyone else to sell, mortgage or give it away. A person may give her child check-writing authority on her bank account (as an “authorized signer only”) even though it is solely owned.
Assets (including inheritance and gift property) owned by two or more persons without the terms “joint tenants with right of survivorship” on the deed or bank account records are owned by them as “tenants in common.” Each tenant in common owns only a proportionate share of the asset, and each owner may sell or transfer that share or will that share to his/her heirs without consent of the other owners. Property inherited by two or more heirs will pass to them as tenants in common. Thus, two brothers who inherit their parent’s land will each become owner of one-half of the property, and either of them may sell his half without the consent of the other.
Property owned by two (or more) persons as “joint tenants with rights of survivorship” is owned totally by each owner and by all owners collectively. The “right of survivorship” means that, at the death of one joint owner, that owner’s interest in the asset does not pass through his/her will or estate, but passes to the surviving owners who continue to own the entire property. If the land deed or bank account does not contain the quoted or similar wording stating the right of survivorship, then the property is not jointly owned but is a tenancy in common.
A common question is: If my spouse and I own our assets as joint tenants with rights of survivorship, do we still need wills? The answer is yes. When one joint owner dies, the surviving joint owner immediately becomes the sole owner of the property. However, when the last surviving owner dies (or if both joint owners die at the same time or close in time), then state law will determine who inherits the property if there is no will. These heirs may not be the desired recipients, particularly if the joint owners have children from prior marriages.
Some possible advantages of joint ownership with right of survivorship are: (a) The jointly-owned assets will pass automatically to the surviving owner at your death without necessity of probate of your estate or will. (b) The other joint owner will have full access to jointly-owned bank accounts in the event you become disabled.
Some disadvantages of placing assets in joint ownership are: (a) The other joint owner can withdraw any jointly-owned financial account funds, leaving you without funds for your support. (b) Jointly-owned assets may become subject to the judgments, lawsuits and bankruptcy of any joint owner. (c) Full ownership of the assets will pass at your death to the other joint owner, who may refuse to share them with other children or family members. (d) Both living joint owners of real property must sign any deed or mortgage, and a conservatorship may be required for a joint owner who becomes mentally incapacitated in order to sell or mortgage the property. (e) If you make your child or other non-spouse family member a joint owner of your assets in order to apply for Medicaid to pay for nursing care costs, Medicaid will still count the entire value of the jointly-held assets as your property.
The various forms of property ownership can achieve specific objectives for a person’s estate plan. It is a good idea to review the ownership of all your assets with a knowledgeable attorney in order to ensure that your wishes will be achieved and your family’s security will be maintained.
Courtney Elder Law Associates has experienced Mississippi asset protection attorneys to help you with your questions and concerns. Call us today at 601-987-3000!