In Arkansas, there are four recognized forms of property ownership: sole ownership and three forms of co-ownership referred to as joint tenancy, tenancy in common and tenancy by the entirety. Sole ownership, as the title indicates, means only one person owns all of the interest in the property. Each form of ownership has its own requirements, limitations, advantages and disadvantages. Understanding them up front will lessen the possibility of problems later on.
Sole ownership is the simplest form of ownership and allows for the greatest control over the property. A sole owner can sell the property, give it away, borrow against it or leave the property in a will. Because it is the simplest form of ownership, it usually does not create any estate planning issues. If you have a will, but do not name specific beneficiaries for property of which you have sole ownership, the property will be distributed based on the directives in your will. If you do not have a will, the property will be distributed according to the laws of intestate succession. Co-ownership means more than one person has a legal interest in the property.
What Does “Joint Tenancy” Mean?
A joint tenancy is created when you, and at least one other person, hold an undivided interest in a piece of property. Your joint tenant does not always have to be your spouse. For example, a bank account in both your name and your brother’s name is a joint tenancy. Another example may be a certificate of deposit with your name and the name of one of your children. As a joint tenant, you can sell or give away your interest in the property, as long as such action is not restricted by title or contract.
When a joint tenancy indicates that it includes “a right of survivorship,” the property is automatically transferred to the surviving joint tenant(s) if one joint tenant dies. This type of property cannot be transferred to anyone by a will.
Advantages to Joint Tenancy with Right of Survivorship in Fayetteville Arkansas
There are many advantages to executing a joint tenancy. It is more convenient, as the property becomes immediately available to the surviving joint tenant(s). Also, jointly owned property does not go through probate, which can greatly reduce the costs of probating an estate. Another big advantage is that joint tenant property is protected from creditors of the deceased joint tenant.
Disadvantages to Joint Tenancy with Right of Survivorship
As with most things, there are certain disadvantages to joint tenancies. Joint tenancies are not as easy to adjust in the event of a divorce or remarriage. Also, one joint tenant has the ability to liquidate an account without notifying the other joint tenants. Similarly, one joint tenant could sell a piece of the property even if the other tenant(s) did not want it to be sold. The person the property was sold to would become a “tenant in common.” However, in the case of married couples, a “tenancy by the entirety” requires the consent of both spouses when disposing of any such property. Determining which type of property ownership is right for you is something that an Arkansas estate planning attorney can assist you with.