One of the many benefits of creating a comprehensive estate plan is the ability to determine who receives your assets after you are gone. Even the most carefully drafted estate planning documents, however, may not be able to accomplish this important goal if your assets are not titled appropriately. The way your home, vacation property, investment real estate, or other valuable assets are titled often determines what happens to that property after your death, regardless of what your Last Will and Testament says. Consequently, choosing the appropriate form of ownership should be an important component of every comprehensive New Hampshire estate plan. Understanding the available ownership options, and the legal consequences associated with each, can help you avoid unintended probate proceedings, family disputes, and transfers that do not reflect your wishes. Toward that end, the attorneys at Legacy Care Law Firm discuss property transfers after death in New Hampshire and explain why the way you title property matters.
Why Property Title Matters
When you purchase real estate, complete a refinance, inherit property, or transfer ownership to another person, a deed establishes the legal ownership of that property. The deed identifies who owns the property and, in many cases, the manner in which they own it. Many people treat this decision as little more than paperwork completed during a real estate closing, but your ownership designation has significant legal consequences because it can determine:
- Whether your interest passes automatically upon your death or becomes part of your probate estate.
- Whether you may transfer or sell your ownership interest independently.
- Whether creditors may pursue your ownership interest.
- Whether another owner’s consent is required before transferring or refinancing the property.
- Whether your estate plan functions as intended.
Choosing the wrong ownership structure can unintentionally undermine an otherwise well-designed estate plan. Likewise, choosing the appropriate form of ownership can simplify estate administration and help ensure that your property passes according to your wishes rather than using the applicable intestate succession laws.
Sole Ownership
One of the simplest forms of ownership is sole ownership, meaning a single individual holds legal title to the property. Sole ownership provides complete control during your lifetime, meaning that you retain the ability to sell, mortgage, lease, or otherwise transfer the property without obtaining another person’s consent. This flexibility makes sole ownership attractive in many situations, but sole ownership also carries important estate planning implications.
Unless another probate-avoidance strategy has been implemented, property titled solely in your name will be part of your probate estate after your death, meaning that the property will have to go through probate before ownership can be transferred to the intended beneficiary.
Tenants in Common
A common form of joint ownership is tenancy in common wherein two or more individuals own separate, undivided interests in the same property. Although each owner possesses an ownership interest in the entire parcel, each person’s percentage interest may differ. For example, one owner may own fifty percent while another owns twenty-five percent and a third owns the remaining twenty-five percent. Each owner generally has the ability to transfer, sell, or leave his or her ownership interest to someone else without automatically affecting the remaining owners’ interests. By way of illustration, you might own 50 percent interest in a family vacation property as tenants in common along with a sibling. You could leave your 50 percent interest to your two adult children, giving them each a 25 percent ownership and leaving your sibling with his/her 50 percent interest.
From an estate planning perspective, one of the defining characteristics of tenancy in common is what happens after death. Unlike other types of joint ownership, a deceased owner’s interest does not automatically transfer to the surviving owners when the property is owned as tenants in common. Instead, that ownership interest generally becomes part of the deceased owner’s estate. If the owner has a valid Last Will and Testament, the interest passes according to the terms of that document following completion of the probate process. If no Will exists, New Hampshire intestacy laws generally determine who ultimately inherits the deceased owner’s interest.
Tenancy in common often works well when unrelated individuals purchase investment property together or when family members intentionally want each owner’s share to pass to his or her own heirs rather than automatically to the surviving co-owner. Although this flexibility can be advantageous, it also means that surviving owners may eventually find themselves sharing ownership with beneficiaries they never anticipated.
Joint Tenancy with Right of Survivorship
Joint tenancy with right of survivorship operates differently because, unlike tenancy in common, it includes an automatic survivorship feature. When one joint owner dies, that individual’s ownership interest passes directly to the surviving joint owner or owners without becoming part of the deceased owner’s probate estate. As a result, the surviving owner automatically acquires full ownership, or an increased ownership interest, by operation of law.
Because probate the decedent’s ownership interest avoids probate, joint tenancy is frequently used by spouses, parents and adult children, siblings, and other individuals who want property to transfer quickly after death. While probate avoidance is a common estate planning goal, it is crucial to keep in mind that adding another person as a joint owner to property can create legal ownership rights while you are alive that cannot easily be reversed. Depending upon the circumstances, the new owner may possess rights affecting future sales, refinancing, partition actions, or creditor claims. In addition, if the new owner transfers his or her interest to another individual, the original joint tenancy may be severed, altering the ownership arrangement entirely.
Consequently, adding a child’s name to a deed simply to avoid probate may produce unintended legal and financial consequences that outweigh any perceived benefits. Before making that decision, consult with an experienced estate planning attorney to ensure that you understand your options.
Trust Ownership
Another option for handling the transfer of property after your death is to transfer the real estate into a revocable living trust. When property is properly titled in the name of your trust, the trust becomes the legal owner of the property. During your lifetime, you typically continue serving as Trustee and retain the authority to buy, sell, refinance, lease, or otherwise manage the property much as you did before transferring it into the trust, but if you become unable to manage your affairs, your Successor Trustee can assume responsibility for trust-owned property without the need for court intervention. Likewise, after your death, trust property generally passes according to the instructions contained in the trust agreement without requiring probate administration for those assets.
Do You Have Questions about Property Transfers in New Hampshire?
For more information, please join us for an upcoming FREE seminar. If you have questions or concerns about property transfers in New Hampshire or about how to title your property, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Salem and Nashua, New Hampshire office can be reached at (603) 894-4141.
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