Estate planning is more than simply drafting documents. A good estate planning attorney will discuss the funding of your estate plan. Funding is the process by which the ownership and/or beneficiaries of assets are looked at, and possibly updated, to ensure they meet your estate planning objectives.
Your home is an important asset. Depending on the goals of your estate plan, your attorney may recommend that you hold title to the property in a specific way. Below are some general ways to hold title to property in Massachusetts:
Tenancy in Common
- Tenants in common are two or more owners, who may own equal or unequal percentages of the property as specified on the deed.
- Any co-owner may transfer his or her interest in the property to another individual. Upon a co-owner’s death, his or her interest in the property passes to the heirs or beneficiaries of that co-owner; the remaining co-owners retain their same percentage of ownership. Transferring property upon the death of a co-tenant requires a probate proceeding if the ownership is help by an individual (as opposed to a trust).
Joint Tenancy
- Joint tenants are two or more owners who must own equal shares of the property.
- Upon a co-owner’s death, the decedent’s share of the property transfers to the surviving joint tenants, not to the decedent’s beneficiaries. Transferring property upon the death of a joint tenant does not require a probate proceeding, but will require certain forms to be filed and a new deed to be recorded. Generally joint tenancy is between two or more people, not people and a trust.
Trusts
- A sole owner of a property never holds title as tenants in common, or joint tenants, because those types of ownership are reserved for multiple owners.
- However, both sole owners and multiple owners have the option of holding title through a trust.
- Typically, a trust-held property avoids probate upon the property owner’s death. The current trustee is named on the deed, and either a recorded Declaration of Trust, or a Trustee’s Certificate, will be recorded which identifies the successor trustee(s) who will manage the property after the initial trustee(s) are no longer serving.
- There are many different types of trusts. A conversation with your estate planning attorney can determine whether owning property through a trust makes the most sense for your situation. If so, an attorney can then draft a trust which meets the objectives of your estate plan.
Things to Consider
- How you hold title affects you, your family and the co-owners of the property. A property can be owned by the same people or entities (i.e. trusts), yet the manner in which title is held can drastically affect each owner’s rights during their lifetime and upon their death.
- Title transfers can affect property taxes, capital gains taxes, and estate taxes. Therefore it is important to be fully informed before entering into any agreement.
- If the property is not titled in such a way that probate can be avoided, your heirs will not be able to receive their vested interest in the property until the probate court proceedings are completed.
- If your property is titled to a trust, you may or may not retain full control over the property depending on the type of trust you need in order to meet your goals.
By consulting an experienced estate planning attorney, you can control how your property is titled so that it meets the objectives you have for your estate plan, and ensures that your rights – and those of your loved ones – are fully protected.