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Planning Your Estate Part 3 -- Whose Name Should Be On the Titles?

Title is the manner in which real and personal property are owned. Title may be proven by certificate, deed, bill of sale, contract, or other document.

Titles can affect how property is transferred, who will get it, and the eventual costs of estate settlement and taxes. Results depend on the way the property is owned.

This publication is intended to describe in general three basic forms of property ownership typical to Mississippi families -- sole ownership, joint tenancy, and tenancy in common. Each ownership method has advantages and disadvantages and must be weighed in light of specific estate management goals.

Types of Property

There are two basic types of property -- real and personal.

Real property is land and whatever is erected, growing on, or affixed to the land. Examples: land, fences, buildings, mineral deposits, and standing, unsevered timber.

Personal property is an asset whose ownership arises out of physical possession of the property or as the result of a document showing ownership. Examples: livestock, machinery, stored grain, bank deposits, stocks and bonds, checking and savings accounts, and automobiles.

Forms of Property Ownership

Sole ownership of property is characterized by a single owner. Except for some legal restraints against maintaining a public nuisance, infringing on the rights of others, zoning restrictions, and interests of a surviving spouse, a sole owner may generally do as he pleases with his property during his lifetime and may designate its disposition after his death.

Any solely owned real and personal property held at death will be included in the gross estate for the determination of federal and Mississippi estate taxes. Usually solely owned property goes through probate to clear the title for heirs and devisees.

Co-ownership of property exists when two or more persons hold legal title to the property. Two types of co-ownership are tenancy in common and joint tenancy.

With tenancy in common, two or more persons hold undivided interests in the same property with no right of survivorship for the surviving tenant in common. Each tenant in common has the right to transfer his proportional share by selling it, giving it away, or by transferring it to persons of his choice at his death.

If the title to real estate is held by persons as tenants in common, all cotenants have equal rights to manage and live on the property. Upon the death of a tenant in common, his interest passes to his heirs by Mississippi law of intestate succession or to his devisees by a will (explained in MSU-ES publication 1739). For federal and state estate tax purposes, only the portion of the property owned by the deceased tenant in common is subject to tax.

Example: Dan and Sam own a business as tenants in common. If Dan dies, his interest passes to his wife and children, not to Sam. If Sam dies, his interest passes to his wife and children, not to Dan. In the event of Dan or Sam's death, only the portion owned by each is subject to tax. Thus, if Dan dies, only his half of the tenancy in common property is subject to tax. Either Sam or Dan may sell his share.

Joint tenancy is one of the most popular and least understood means of owning property. After a couple marries, they generally place property in joint tenancy.

Joint tenancy with right of survivorship is a form of co-ownership in which two or more persons own the same property subject to the other joint tenant's ownership right.

In general, a joint tenant may make lifetime transfers of his interest. When a joint tenant dies, his economic interest automatically passes to any surviving joint tenant or tenants. In other words, the surviving joint tenant owns the entire property subject to no other claims of ownership. The deceased joint tenant cannot leave his interest to a devisee in a will nor does his interest pass to heirs by intestacy.

Example: Ron and his brother Don own land as joint tenants. Ron dies with a will leaving his interest in the joint tenancy property to his son. The joint tenancy title prevails. Don receives Ron's interest in the land as surviving joint tenant. Ron's son would not inherit his father's interest in the land.

Joint Tenancy Consequences

Is it best for a parent and children, brother and sister, or unrelated individuals to hold title to real or personal property (e.g., stocks and bonds, checking and savings accounts, homes, or farms) in joint tenancy with right of survivorship? The correct answer is not a simple "yes" or "no." What is best for one family or situation may not be right for another family or situation.

Joint ownership with the right of survivorship has many consequences -- some considered advantages, others disadvantages.

By holding property in joint tenancy, a family could be disinherited.
Example: Two brothers, Roger and Paul, own land as joint tenants with right of survivorship. Upon the death of one, the survivor automatically receives the decedent's interest. If Roger dies, Paul receives Roger's interest in the land. Roger's wife and children do not inherit, because their names are not included in the deed. If Roger left a will stating that his property was to go to his wife, the joint tenancy deed has priority. His wife would not inherit his interest.
If a parent holds title to real property in joint tenancy with his children, the parent loses complete control over his property. The parent can sell his interest, but it's doubtful if anyone would buy it under such circumstances.
Example: Jane, through efforts of herself and her husband (now deceased), owns her home outright. To save probate costs, she placed the property in joint tenancy with her daughter. Jane wants to sell the home because she is going to remarry and move to Florida. Jane's daughter, "for her mother's own good," refuses to sell.
Hard feelings may develop if only one child's name is included on the property deed and other children are excluded. Upon death of the parent, the property goes to the surviving joint tenant. The other children are "disinherited."
Example: Mrs. Jones placed title to the farm with her son thinking he would share with his sister after their mother's death. The son refused to give a share of the property to his sister when their mother died. Legally he is not required to do so.
Parents who think they can avoid federal estate taxes by placing titles, bank accounts, and so on in joint tenancy with their children are misinformed. The total amount is included in the parent's gross estate unless the children can prove they contributed funds to the joint tenancy formation.
Example: Nellie put her savings accounts totaling $100,000 in joint tenancy with her grandchildren. She thought she could avoid paying federal estate taxes on the $100,000. She was mistaken. The total was included in her gross estate.
Joint ownership may be useful to pass property (e.g., an automobile or home) to the surviving owner conveniently and without delay.
A joint bank account with the right of survivorship may provide funds immediately for the main tenance of joint survivors.

Property Ownership and You

How many evidences of titles do you have now, including everything from land (deed, bill of sale) to automobiles?
Where are they kept?
Whose name or names are on the documents?
What will happen to real and personal properties when either spouse dies?

Maybe now is a good time to gather all those titles from their various hiding places and examine them in the light of your present and future estate.

Examine your circumstances carefully. Whether to hold property presently owned in joint tenancy with right of survivorship or tenancy in common or sole ownership, or how to acquire additional property requires careful study. Changes in tax laws, property laws, and property values and other factors affect such a decision.

Your Property Ownership Review

Whose name is on the titles of your property? Check the actual title wording on the documents. Were you correct in how you thought they were titled?
Do you believe any of the titles need to be changed?

Family Think Session

Do you have real or personal property titled as joint tenants with right of survivorship with a spouse, children, other relatives, or friends?
What are the consequences of such an arrangement if you should die?

References

Information in this series is adapted from Estate Planning for Every Montanan by Marsha A. Goetting, Montana Cooperative Extension Service.

Lynn, Robert J. Introduction to Estate Planning. St. Paul, Minn., West Publishing Co., 1981.

Martin, Robert J. "Estate Planning: An Investment in Your Family's Future," Publication 1373, Cooperative Extension Service, Mississippi State University, 1990.

Milner, Dorothy Leggett. "An Introduction to Estate Planning." Research paper, Mississippi State University, 1978.

Mississippi Code 1972 (Annotated), Vol. 20, Title 91, Sections 91-1-1 through 91-7-1.

State of Mississippi Estate Tax Law, Mississippi State Tax Commission, 1978.

Quiz

Select the correct answer.

An example of personal property is:
1. a. land
  b. buildings on land
  c. mineral deposits
  d. bank deposits
An example of real property is:
1. a. livestock
  b. machinery
  c. bank deposits
  d. land
Bank and savings accounts can be used by the surviving joint tenant as if the decedent is still living.
1. a. true
  b. false
Tenancy in common property must go through probate to clear the title.
1. a. true
  b. false
For questions 5-9, use TC if the correct response is tenants in common and JT if the correct response is joint tenants with right of survivorship.
Undivided interests in same property with no right of survivorship for the other tenant ______.
On the death of a ______, his interest passes to his heirs or devisees.
Each ______ may sell or transfer his proportional share.
______ property cannot be transferred by a will except by last surviving joint tenant.
______ property can be transferred by will.

Answers to the quiz

This publication is not designed as a substitute for legal advice. Rather, it is designed to help families become better acquainted with some of the devices used in planning an estate and to create an awareness of the need for such planning. Future changes in laws cannot be predicted, and statements in this publication are based solely on the laws in force on the date of printing.

By Beverly R. Howell, Ph.D., Family Economics and Management Specialist

Mississippi State University does not discriminate on the basis of race, color, religion, national origin, sex, age, disability, or veteran status.

Publication 1740
Extension Service of Mississippi State University, cooperating with U.S. Department of Agriculture. Published in furtherance of Acts of Congress, May 8 and June 30, 1914. Ronald A. Brown, Director

Copyright by Mississippi State University. All rights reserved.

This document may be copied and distributed for nonprofit educational purposes provided that credit is given to the Mississippi State University Extension Service.

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