SURVIVORSHIPS, JOINT TENANCIES, ALTERNATE BENEFICIARIES: THE INS AND OUTS R. J. (RON) DOLD, Houston WESTCOR LAND TITLE INSURANCE COMPANY 29TH ANNUAL ROBERT C. SNEED TEXAS LAND TITLE INSTITUTE December 5 - 6, 2019 San Antonio CHAPTER __ “2019 Texas Land Title Institute” Survivorships, Joint Tenancies, Alternate Beneficiaries Biography for Ronald J. Dold Ron joined the Texas underwriting staff of Westcor Land Title Company in 2018 after 5 years with the Office of General Counsel of The Texas A&M University System, and has over 40 years’ experience in real estate related practice. Ron holds a Bachelor’s Degree in Industrial Engineering from General Motors Institute in Flint, Michigan, a Master’s Degree in Industrial Engineering from Texas A&M University in College Station, Texas and completed his law degree at South Texas College of Law in Houston, Texas. Ron worked 17 years for two major oil companies in Houston, and prior to his time at A&M, served for 15 years as Senior Underwriting Counsel in a National Commercial Office for a major title insurance company in Houston, underwriting high liability transactions and working closely with outside counsel for all parties. Since 2006, Ron has been an active speaker on the CLE circuit on a variety of real estate and title insurance topics. Ron and his wife Brenda reside in Bryan, Texas. “2019 Texas Land Title Institute” Survivorships, Joint Tenancies, Alternate Beneficiaries SURVIVORSHIPS, JOINT TENANCIES, ALTERNATE BENEFICIARIES: THE INS AND OUTS Since the tax man and Probate Courts were invented, and deed records were created to evidence transfers of property, individuals have worked diligently to find a way to pass title owned at death to family members or other heirs-at-law without subjecting property to potential estate taxes or having to involve Probate. One vehicle commonly used is establishment of a Living Trust with designated beneficiaries, which is beyond the scope of this discussion. Another method devised was the use of joint ownerships, together with a system of survivorship rights. It is this system which is the topic of this discussion. Our discussion here will focus on the various types of joint ownership, and the methods for creating effective survivorship rights to designated individuals without involving probate. Types of Joint Ownership There are several types of joint ownership recognized under common law. The generic term used for joint ownership is “tenancy in common.” By definition Tenancy in Common is a specific type of concurrent, or simultaneous, ownership of real property by two or more parties. Generally, co-ownership can take three forms: 1) tenants in common; 2) joint tenants; and 3) (in Texas) community property. In non- community property states this last type is referred to as tenants by the entirety. These forms of concurrent ownership give individuals a choice in the way that co-ownership of property will be carried out and each type of tenancy is distinguishable from the others by the rights of the co-owners. These 3 types of joint ownership can be created by deed, will, or even operation of law. One common trait among the various types of co-ownership is that each owner has an "undivided interest" in the property and all have an equal right to use 100% of the property, even if the percentage of interests are not equal or the living spaces are different sizes. Any such use must be done in such a way so as to not precluded use by any other co-owner. Tenants in Common The most common co-ownership type in Texas (other than community property rights discussed below) is tenants in common. Usually, the term “tenant” in real estate terms is understood to describe a person who rents or leases a piece of property. In the context of concurrent estates or co-ownership however, a tenant is considered to be a co-owner of real property. Thus tenants in common is a form of concurrent ownership of real property in which two or more persons possess the property simultaneously. All tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to alienate, or transfer the ownership of their individual ownership interest. This can be done by deed, will, or other conveyance. Furthermore, tenants in common may acquire their interests from different instruments and at different times. Another distinct characteristic of tenants in common is that the co-owners may hold unequal interests in the property. A tenancy in common can be created by deed, a will, or by intestate succession. “2019 Texas Land Title Institute” Survivorships, Joint Tenancies, Alternate Beneficiaries Community Property Rights Texas is of course a community property state, meaning that all property acquired during marriage is owned in equal shares by the two spouses. The exceptions to this rule is any property: 1) owned before the marriage; 2) inherited; or 3) received by gift. There is a (rebuttable) Community Property Presumption which holds ALL property owned by a married couple is presumed to be community property on divorce or death unless it can be conclusively proven to be non-community or separate property. Generally, the character of property as either community or separate is based on marital status at the time the property was acquired, which is the purpose of the marital history affidavit (to include dates of marriage and divorce) that every title office obtains in every transaction where ownership is held by individuals. I want to mention in passing and as a matter of legal curiosity, in non-community property states there is also a vehicle to address the rights of a spouse in ownership of property acquired during marriage called a tenancy by the entirety. A tenancy by the entirety is type of concurrent estate in real property held by a Husband and Wife whereby each owns the undivided whole of the property, but it is similar to a joint tenancy because it is also coupled with a right of survivorship, so that upon the death of one spouse, the surviving spouse is entitled to the interest of the deceased spouse. Contrast this to a community property interest which is similar to a tenancy in common and upon death of one spouse the interest of the deceased spouse does not transfer automatically to the surviving spouse but rather is passed as an inheritance under a will or the laws of intestate succession. Joint Tenancy (With Right of Survivorship) In estate law, a joint tenancy is a special form of ownership by two or more persons of the same property. The individuals, called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. The term “joint tenancy” by definition creates a right of survivorship, that is, when any one of the joint tenants dies, that interest is transferred and divided among the remaining survivors in equal shares. Four main features mark this type of ownership: (1) the joint tenants own an undivided interest in the property as a whole; each share is equal, and no one joint tenant can ever have a larger share; (2) the estates of the joint tenants are vested (meaning fixed and unalterable by any condition) for exactly the same period of time, in this case, the tenants' lifetime. (3) the joint tenants hold their property under the same title, that is, joint tenants must obtain their interests at the same time and in the same document; and (4) the joint tenants all enjoy the same rights until one of them dies. When only one joint tenant is left alive, he or she receives the entire estate. A joint tenant may alienate his property, but if that occurs, the tenancy is changed to a tenancy in common and no tenant has a right of survivorship. Survivorship As stated in the beginning or our discussion the objective of survivorship rights advocates is to find an effective way to transfer title owned at death to family members or other heirs-at-law without subjecting “2019 Texas Land Title Institute” Survivorships, Joint Tenancies, Alternate Beneficiaries the property to potential estate taxes or having to involve Probate. The focus of our discussion will be joint tenancies with right of survivorship, but we will also briefly discuss the use of an Enhanced Life Estate Deed (aka “Lady Bird” deeds ) and a fairly recent method advocated by the Texas Legislature, the Transfer on Death Deed or “TODD .” Enhanced Life Estate Deeds aka “Lady Bird Deed” . A Lady Bird Deed was designed to help pass property from a deceased individual to a survivor outside of probate. The Lady Bird Deed allows the grantor the right to keep the property, sell it, lease it or mortgage it and keep all proceeds of the property. This enhanced life state arrangement can do a number of things, including: • Allows for the transfer of the remaining interest on a piece of real estate; • Allows the current owner to reside in the property; • Allows the current owner to terminate the remaining interest on a property and transfer it to someone else; • Allows individuals to bypass gift tax A Lady Bird Deed may be signed by an agent acting as a Power of Attorney. Transfer on Death Deeds aka “TODD” . In the 2017 Legislative session the Texas Legislature added Chapter 114 to the Estates Code to provide the Transfer on Death Deed allowing for the transfer of a property interest upon the death of the Grantor. Much like the Lady Bird Deed, the Transfer on Death Deed is designed to avoid real estate recovery. Key requirements for creating a valid TODD are” • Capacity for creating a TODD is the same as the capacity to make a contract; • Contain the essential elements and formalities of a recordable deed; • Include a statement that the transfer of the interest is to occur at the Grantor’s death; • Must be recorded in the County where the land is located prior to the death of the Grantor; • No delivery/acceptance is required by the beneficiary; and • No consideration is required.