Forms of Ownership
Following, is a listing of some types of ownership.
Joint Tenancy or Joint Tenancy With Rights of Survivorship
This is a form of joint ownership where all joint owners have an undivided interest in the entire property. If a joint owner dies, the other becomes the complete owner of the property.
Tenancy by the Entirety
Form of ownership limited to a husband and wife in which each has an undivided interest in the entire property. The survivor ends up with the entire property.
Tenancy in Common
Form of joint ownership where each party owns a specified share of the property. There is no right of survivorship. When one owner dies, their share goes to their estate (or a beneficiary that is designated), not to the other owner.
Community Property
This is limited to married couples in the states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. The assetsinclude allproperty acquired during the marriage while they are domiciled in a community property state, except property received as a gift or inheritance. Each spouse is deemed to own half of the property.
Custodian for a Minor
Under state Uniform Gifts (or Transfers) to Minor Acts (“UGMA”) an adult person can hold title to property for the benefit of a minor. Upon the minor reaching majority, the funds must be transferred to the minor’s name. Assets held under UGMA use the social security number of the minor and the income is reported on the minor’s tax return.
Trusteeship
Assets held in a trust are “owned” by the trustee for the benefit of the beneficiaries as designed in the trust agreement. There are many different types of trusts and many different reasons why they are formed. Some trusts pay taxes and transfers to some trusts are subject to gift tax. Trusts can be formed by a person during their lifetime or upon their death per instructions in a will.
Totten Trust
This is not actually a trust but a designation on an account at a financial institution where someone other than the depositor or account owner is named as a beneficiary in the event of the owner’s death. The designation would have the owner’s name with “in trust for ___________ [beneficiary’s name]” after it. Upon the owner’s death, title immediately transfers to the “in trust for” person.
Power of Attorney
This is where someone is granted control over a bank or brokerage account, but does not have any ownership or inheritance rights. The power terminates at death. This is usually used if there is incapacity and the funds need to be accessed. The power can be limited to a single account or to every asset the person granting the power has.
These methods involve serious tax, estate and financial planning issues and should not be done without competent professional advice. All documents should be prepared by an attorney experienced in such matters.
Some of this material originally appeared in Getting Your Affairs in Order by Edward Mendlowitz, CPA ©2012. Available for sale at www.Amazon.com and www.BN.com .
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