My wife and I are purchasing our first home and we want to make sure that our asset is protected if something should happen to one of us. To make matters more complicated, I am contributing a larger portion of funds that I recently received from an inheritance and I would like our ownership to reflect that contribution. Our lawyer is saying that both of these items cannot be reflected in the deed to the property. Why is this?
When two people purchase a property, they can take title as joint tenants, thereby setting in place a right of survivorship if one of them should die. This means that the portion attributable to the deceased individual would legally pass to the remaining owner upon the death of the other joint tenant.
Taking ownership in this manner is a prudent and very common method of ownership, especially for partners and family members because it avoids estate taxes on the asset. However, there is one catch.
Joint tenancy can only be reflected as a 50/50 split in ownership and contribution. The other method of ownership, as tenants-in-common, can indicate a different split (70/30). However, if one of the owners were to pass away, their portion would not transfer to the remaining owner but rather would go to their estate and therefore be taxable.
Your lawyer was correct. You cannot have the right of immediate inheritance if you want to have anything other than a 50/50 split indicated in the title to your new property.
Jeffrey Cowan is the principal of Cowan Taylor & McGee and can be reached at email@example.com.