In South Carolina, you have the right to title assets (this includes real property, bank accounts, car titles and more) in several ways. Today’s post will not detail ALL of the various ways we can hold a title, but will discuss two different types of joint ownership and how they can be used to hold property with a spouse. To simplify this concept, we will use in this post the example of a deed to a marital home worth $200,000. Let’s begin with tenancy in common.
Tenancy in common is the legal term for ownership held by two or more people where each owner has an undivided interest in the property. In our example, this means that if Husband and Wife hold their $200,000 home in a tenancy in common that each of them is a 50% owner. Under this type of ownership, if the Husband dies first, his 50% (roughly $100k of equity) will pass through his estate. If the Husband has done proper estate planning and left a valid Last Will and Testament, chances are that this will not be a problem as he likely leaves his 50% back to Wife so that she ultimately owns 100% of the marital home. If, however, he failed to leave a will, his 50% will be passed through the laws of intestacy (we’ve explained this in a previous post) and the Wife will end up sharing the home with other heirs. This can be a disaster if the other heirs are his children from a previous marriage, their children who are still minors, etc. This can also be a nightmare if the Husband dies with significant creditors as they can attack the 50% interest in the home in an attempt to collect on his debt. For these reasons, we commonly suggest to our married estate planning clients that they consider the next form of ownership, Joint Tenancy with Right of Survivorship.
Joint Tenancy with Right of Survivorship is a mouthful, but when understood and used properly it can be a huge benefit to South Carolina residents to protect their assets from creditors, etc. Certain language included in a deed can create a “joint tenancy with a right of survivorship” or JTROS. In this form of ownership, if the Husband dies first, his 50% passes immediately to the remaining owner (i.e. the “survivor” of the tenants takes it all) and it does so without passing through an estate, going through probate, or anything else. It’s “automatic.” Now, there is a list of circumstances beyond the scope of this post where this doesn’t work (more than 2 owners, one joint tenant kills the other, etc.) but for the most part, this is a great piece to your estate plan.
Remember that our example used a marital home but these rules can apply to almost any form of property that is titled including cars, bank accounts, retirement accounts and more. Also, remember that other factors must be considered when choosing a form of ownership. For example, a couple may choose not to title an asset in one spouse’s name if they have outstanding liens or judgments against them.
Using these forms of ownership is a great estate planning tool in South Carolina. David Causey, an attorney in our office, offers both reduced consults and flat fee deed preparation to help you take advantage of these options. If you’re unsure how your assets are currently titled, it's wise to determine that by getting a copy of your deed, contacting your bank, reviewing your car title, etc. Once you know how all of your assets are titled, an estate planner can better assist you in understanding how all of these pieces come together to form a solid estate plan.
One last warning, and it’s a big one, while these are excellent tools to use with your spouse, they can have disastrous outcomes when used with children. We’ll cover that in an upcoming blog post!