The Various Ways to Hold Title of Assets
Have you ever purchased your first home or opened a taxable account and got hit with the question “how would you like to hold title to this”? Most people just look confused like a deer in headlights! With so many different choices to choose from, it’s important to think of your objectives for the account or property you are opening up/buying before deciding how to hold title. The saying “the devil is in the details” really holds true for how you decide to title your assets because it not only determines who has access to the asset, but also what rights they have and who gets to inherit it. Below are some of the most common ways to hold title of assets.
Sole Ownership – Most often used by single people or married people who want the ownership to be in one spouse’s name only. This is the simplest way to title an asset because the single owner has complete control over the asset. Some drawbacks of taking title this way are they can be subject to creditor claims and they can be subject to probate upon the owners passing because they are included in their taxable estate.
- Transfer on Death (TOD) – A way to avoid probate with sole ownership accounts is to enable a transfer on death on the account. A TOD allows the owner to choose the beneficiary(ies) they’d like for the asset to go to upon their passing. It’s important to note that the beneficiary named does not have access or control over the asset if the owner is alive.
Joint Tenants with Rights of Survivorship (JTWROS) – This titling option is most used between married couples but can be used by anyone that wants to own an asset together. It gives everyone equal ownership rights. So, if a married couple owned an asset together, they would have a 50/50 ownership split. If one of the owners passes, their share automatically transfers to the surviving owner and avoids probate.
Joint Tenants in Common – This is option is most used between non married couples although married couples can use it as well. It allows you to divide up the interest in the asset however you want (equal or unequal). So, if two people buy an asset and use this titling option, they are able to split their interest as a 70/30 ownership percentage. If one of the owners passes away, their share passes through their estate and does not go to the joint owner. Be aware that using this titling option could make your share subject to the other partners creditors.
Community Property with Rights of Survivorship (only available community property states: Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington, and Wisconsin) – This titling option is only available between husband and wife and percentage ownership is equal. Upon the passing of one spouse, their interest passes to the surviving spouse and avoids probate.
Living Trust – The most bullet proof way to make sure that an asset is distributed according to the owners wishes if they were to pass away. It is a written legal arrangement that outlines a clear path of the owner’s intentions for how assets should be handled once they pass. This helps avoid confusion amongst heirs.
To avoid careless mistakes that can have unintended consequences, it’s important to take time and make sure you choose the appropriate titling for assets!
Amber Kodad, CFP®, MBA
Director, Advisor Resource Center
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through WCG Wealth Advisors, a registered investment advisor. WCG Wealth Advisors and The Wealth Consulting Group are separate entities from LPL Financial.
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