If you own property, either by yourself, with your spouse, a friend, or domestic partner, you will need to decide what happens with that property after your passing. In some cases, the property will pass directly to your spouse or co-owner, regardless of what your Last Will and Testament may or may not stipulate, but only in very specific instances. In all others, you will need to state what occurs after your death. Let’s take a look at what it means to pass on property.
Property titled in the names of two or more people, (friends or domestic partners) who are named as joint owners with right of survivorship automatically goes to the joint owner upon your passing, regardless of what a Last Will and Testament may direct. I’ve seen this become an issue when friends or domestic partners purchase a home together with the opposite intent of wanting their share to pass to their own heirs. In that case, it may be better to title the property as tenants-in-common. However, you need to make sure that the survivor is able to stay in the property, which might require a contract with the beneficiaries of the first to die. Something you’ll want to consult your attorney about.
Spouses who purchase property together commonly hold it as “tenants by the entirety.” This designation is only used for married couples. It means that they each own an undividable interest in the whole. When one spouse dies, the property automatically becomes the property of the other regardless of what a Last Will and Testament may stipulate. This type of titling also provides creditor protection to an “innocent spouse”. For example, if one spouse ran up a credit card debt, the creditor couldn’t go after the house if the other spouse was not responsible for the debt.
It is important to state in your estate plan what your wishes are with regard to the transference of your real estate upon your death. Make sure the titling on the property allows you to accomplish your objectives. For example, in Maryland if one spouse owns the property solely in their name and does not leave the property to the other spouse, then there is a risk that title to the property will go to not only the spouse, but also the spouse’s children, or if no children, to the parents and spouse. Having a well written estate plan in conjunction with careful titling of your real estate may avoid this headache. Please talk to your estate planning attorney for more information on how to implement this information.