Understanding real estate titles and what happens when you die

My spouse and I bought an apartment together before we were married. The deed states that we own it as “joint tenants with rights of survivorship.” We got married after we bought it. Is our apartment protected from creditors? What happens to our ownership interests if one of us dies or we get divorced?

There are three general methods to categorize ownership in real property in New York: Tenancy in common, joint tenancy with rights of survivorship, and tenants-by-the-entirety. The law makes ownership in co-operative apartments treated the same as real property, even though it is technically ownership in a corporation.

A tenancy in common means that each owner has a divisible interest in the real property. There can be more than one owner, and it can be in 50-50 division or any other allocation (i.e. 60-40, 20-10, etc.). Sometimes you can see more complex structures where a portion of the property is held as joint tenancy with rights of survivorship between two parties and another portion is held by a tenancy in common owner. This means that any tenancy in common may transfer or encumber his interest in his share of the real property. He can also devise the tenancy in common interest at death in a Last Will and Testament or have it pass under the laws of intestacy when he dies without a will.

In a joint tenancy structure, a joint owner’s interest can be sold or encumbered during her lifetime with the consent of the other joint tenant(s), however, her share cannot be devised in a Will or pass by intestacy. Instead, it passes to the surviving joint tenant(s) — hence the “right of survivorship.” Put another way, the last man standing takes full ownership to the property.

Since the passage of the Marriage Equality Act in New York State in 2011, tenants-by-the-entirety is available to all spouses, whether opposite sex or same sex. A tenants-by-the-entirety affords not only survivorship rights, but also certain creditor protection rights.

A tenancy-by-the-entirety affords greater creditor protection to the surviving tenant. A tenancy-by-the-entirety is only available to persons who are married at the time they take title. If you take title before you are married as joint tenancy with rights of survivorship and later marry, the tenants-by-the-entirety does not automatically spring into effect or convert the joint tenancy; rather, you would need to execute a new deed reflecting the change in ownership status.

Even if you closed on the apartment the day before your wedding and the deed says “as husband and wife,” if you were not legally married when you received the title, and the title would likely be deemed by a court of law or title company as a joint tenancy with rights of survivorship, since the intention to confer survivorship rights is usually (although not always) interpreted in the case law by the statement of “as husband and wife.”

Now that same-sex marriage is legal throughout the United States, a trend toward the use of the phrase “as spouses” rather than “as husband and wife” will likely become more common to appropriately reflect the legal changes to the definition and scope of marriage.

These rules only apply to transactions that occurred after 1975. If the real property at issue was purchased before 1975, and the deed states that the parties were married when in fact the parties were not married or the validity of the marriage is later challenged, the ownership will be deemed a tenancy in common, which does not provide for survivorship interest.

If the property at issue is a cooperative apartment, the rules described above only apply since 1996. Prior to 1996, shares in cooperative apartments were not deemed to be the equivalent of real property and could not be held as tenants-by-entirety.

As noted above, tenants-by-the-entirety are afforded extra creditor protection on their home that is not available to joint tenancy with rights of survivorship tenants. For example, if your husband has judgment creditors, that creditor cannot satisfy the judgment against the apartment while you continue to own it with your husband as a tenant-by-the-entirety. If you hold the property as joint-tenants, the creditor may enforce the judgment against your husband’s interest in the apartment. Although it is limited to your husband’s indivisible one-half interest in that case, it could force a sale of the apartment.

There are many more elements to consider when assessing ownership to real property, and every situation is different. It is always a good idea to review titling to your assets upon the occurrence of any life change — whether marriage, death, divorce, or the birth of a child or grandchild, and to update your documents to ensure they continue to meet your goals and objectives. You should always consult with your attorney before undertaking any changes.

What happens to my house after I die? How does title get transferred?

The answer depends on how the property is titled (see above). For example, if you are married and the house is owned by you and your spouse (and your spouse is still alive), then you most likely hold title as tenants by the entirety. If this is the case, then, upon the death of the first spouse, the surviving spouse automatically takes sole title to the house as the surviving tenant by the entirety. In that scenario, since your spouse would be the sole owner after your death, he would have the option of selling the house upon your death or to continue living there.

If you own the property individually or jointly with another person without rights of survivorship, then your Will (if you have one) dictates what happens to your property when you die. Your Will can state that you leave the property to one or more individuals, or you can direct that it be sold when you die. Either way, an executor or administrator needs to be appointed by the court before title can be transferred or the property can be sold in either a probate or administration proceeding.

A probate proceeding is the process by which a Will is offered for probate, meaning that it is presented to the court to be recognized as a valid Will and to have an executor appointed to represent the decedent’s interests and administrate the estate (meaning to pay the decedent’s debts and distribute his remaining assets as dictated by the Will).

If there is no Will, the process is similar except that the court appoints an administrator and the assets are distributed under the laws of intestacy to the decedent’s next-of-kin, which is dictated by statute and not in accordance with any wishes the decedent may have expressed verbally but never reduced to a valid Last Will and Testament. Once the executor is appointed, he or she can sign a real estate broker’s agreement, and a contract of sale and deed on behalf of the estate.

As always, you should consult with an experienced estate attorney to discuss how these and other rules or laws could affect the distribution of your property when you die.

Alison Arden Besunder is the founding attorney of the law firm of Arden Besunder P.C., where she assists new and not-so-new parents with their estate planning needs. You can find Besunder on www.besunderlaw.com.

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