Different ways to title your real property and the consequences

Oct 29

Last Thursday, we held our monthly Homeowner Happy Hour, a fantastic opportunity for networking over light appetizers and drinks. The event featured a brief information session on preparing your home for winter, with insights from a local contractor, financial advisor, and estate planning attorney. If you couldn’t make it, here’s a recap of the key points discussed by attorney Megan Easter:

Tenants by the Entirety – for married couples only

Undivided interest in the property
Transfers by operation of law to the survivor
Creditor protection

Joint Tenants with Rights of Survivorship

Can be for any two or more individuals
Transfers by operation of law to the remaining owners. Last one to survive will become the sole owner
Creditors can attach to a joint owners individual interest

Tenants in common

Same as joint tenants with rights of survivorship except…
Upon death of an owner their interest does not transfer by operation of law and will be governed by their estate planning documents or intestacy laws
Creditors can attach

Life Estate Deed

Essentially designates a beneficiary on the property, so it transfers by operation of law upon the life tenants death to the remainder beneficiary(ies)
Can be with or without powers

With – owner can sell and do what they want with the property during their lifetime so creditors could possibly attach to the living owner
Without powers – owner is limited by the deed such as not being able to sell the house as such there is creditor protection

Sole ownership

Just as it sounds but some issues to consider:

Who do you want to inherit your property?

This can be done by Will, Revocable Trust, or Life Estate
If no planning is done then it will be governed by the laws of intestacy
When an individual dies owning real property always check to see if an estate needs to be opened sooner rather than later to avoid having to clean up title at a later time

This is for Maryland specifically as community property states are a little different

Protecting your real property from creditors

TBE – can’t be broken unless both spouses liable
RTA – spendthrift clause

A spendthrift clause is a standard clause put in most trusts with language precluding creditors from attaching to the trust by not allowing the trustee to make payments to anyone other than the beneficiary, thus the trustee cannot make direct payments to creditors so they cannot attach to the trust.

Life Estate Deed without powers (similar to an Irrevocable Trust, but established by a Deed instead of a trust instrument)
Irrevocable Trust - spendthrift clause