How Can Assets Be Owned?
In order to plan financially, you must understand the concept of ownership. Joint ownership is the most common method by which married couples take title to their house …
How Can Assets Be Owned?
In order to plan financially, you must understand the concept of ownership. Joint ownership is the most common method by which married couples take title to their house and other assets. It may also be used by others who wish to share the control of some property. Let’s examine the three basic types of joint ownership, each of which has certain special legal and financial characteristics you should know about.
Joint tenancy: With this type of ownership, both owners have a complete and undivided interest in the property. Neither owner can sell or transfer his or her interest in the property without the consent of the other owner. When one owner dies, the property immediately passes to the surviving owner without having to go to probate (the acceptance of the will of the deceased by an appropriate court). For joint tenancy to be in effect, the names of both owners must appear on the deed or other ownership documents. Both married couples and single people use joint tenancy as a method of guaranteeing ease of transfer of property upon the death of one of the owners.
Tenancy in common: With this type of ownership, each owner has title to half the property. If one owner dies, his or her share does not automatically pass to the survivor. Instead, it is disposed of in accordance with the will of the deceased. This method is used by friends or relatives who wish to form a joint ownership and share its benefits while they are alive but want to retain the right to decide individually what happens to their share of the property when they die.
Community Property: In certain states, husband and wife share equally in any property either one accumulates while they are living together. This is so regardless of whose name appears on the deed or ownership papers. Such jointly owned property is called community property, and the states where this is a matter of law are called community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin).
There are exceptions under the law to community property: (1) property obtained by either spouse prior to the marriage; (2) property acquired after the marriage by gift or inheritance; and (3) property acquired in non-community-property states. Note that the fact that you have moved from a community-property state to a non-community-property state does not automatically exempt you and your spouse from the community-property law. You are still subject to the law for property you obtained while married and a resident of the community property state.
THOUGHT OF THE WEEK
“Do for yourself at least as much as you do for others.”