There are many ways to own your assets. When you pass, it is only natural that you want your family to share in the success of your hard work. When deciding how to hold the title to your property, there are a number of factors that can affect your choice. Factors such as whether you are married, whether you are purchasing the property with someone else or whether you have a trust for your estate. There may be other factors such as whether this is a property intended for investment or whether you are purchasing in the name of a corporation or LLC. But for most individuals, the most common options are typically straight forward.
In Nevada, some of the most common forms of ownership can include sole ownership as a single or married person, joint tenants in common, joint tenancy with rights of survivorship, community property and community property with rights of survivorship. All have specific features that are tailored to various needs and purposes.
Tenants in Common
When two or more co-owners take title to real estate, especially if they are not married to each other, they often become tenants in common. For example, two business investors might select this method.
Each tenant in common owns a determined interest in the property. It need not be equal. One owner might be vested with 60% interest; another could own a 40% interest. The interest owned is written on the deed.
A major advantage is that each tenant in common can sell or pass his or her interest by will to whomever he or she wishes. This form of ownership is common in second marriages, so each spouse can will his or her share to the children from a first marriage. Tenancy in common property is subject to probate court costs and delays.
Some disadvantages are that a tenant in common can bring a partition lawsuit to force a property sale if the other co-owners are unwilling to sell. The court can then order the property sold, with the proceeds split among the co-owners according to their ownership shares. Additionally, a tenant in common could wind up co-owning property with a stranger.
Joint Tenancy with Right of Survivorship
When title is held in joint tenancy with right of survivorship, all co-owners must take title at the same time; they own equal shares and the surviving co-owner winds up owning the entire property. After a joint tenant dies, the surviving joint tenant(s) receives the deceased’s share. The deceased will have no effect on joint tenancy property.
A major advantage is that probate costs and delays are avoided when a joint tenant dies. The surviving joint tenant(s) usually needs only to record an affidavit of survivorship and a certified copy of the death certificate to clear the title.
A major disadvantage is that a joint tenant can sell or give his property interest to a new owner without permission of the other joint tenant(s). However, in Nevada, this may not be the case if a valid Homestead Exemption has been filed by both parties.
Husbands and wives who acquire real property in community property states (such as Nevada) can take title as community property. Each spouse then owns half the property, which can be passed by the spouse’s will either to the surviving spouse or someone else. Nevada also allows married parties to also take title in community property with rights of survivorship as well.
The right of survivorship means that a decedent’s interest passes upon death to the remaining spouse. A special advantage is that community property assets willed to a surviving spouse receive a new stepped-up basis at market value on the date of death. This will result in less income tax when the asset is sold. In 1987, the IRS extended this community property stepped-up basis advantage to husbands and wives holding joint tenancy titles in community property states. To qualify, IRS Revenue Ruling 87-98 requires spouses to acknowledge in writing to each other that their joint tenancy property is also community property.
If you have any further questions regarding joint tenancy or would like to make an appointment with Gloria Petroni, call 775.420.4221.