Property Ownership Types

Common Law Ownership

By default, property is owned by a single person, and automatically becomes part of that person's estate upon his or her death. In such cases, the executor of the estate will have to take possession of the property, and either use it to pay off estate debts, or distribute it to the estate heirs.

Community Property

In community property states, property acquired by a married person is normally considered to be jointly owned by the spouse, with each spouse having a 50% ownership share.

Nine states support community property by default: AZ, CA, ID, LA, NM, NV, TX, WA, and WI. Several other states support mechanisms to allow married couple to opt into a community property sharing arrangement via a community property trust (or other state-specific names): AK, FL, KY, PR, TN, and SD.

Upon the death of a married person, by default that person's ownership share of any community property becomes part of his or her estate, to be handled in accordance with the will or state-specific intestate rules (see Ownership with Rights of Survivorship below for an important exception).

For example, if a husband and wife own a house together, upon the husband's death his 50% share of the house may be bequeathed to someone in his will, or may simply be included in his residuary estate to be allocated to various heirs as desired by the estate's executor. Similarly, if a husband and wife own a bank account together, half of the value of the account would become part of the husband's estate, to be used to pay off estate debts or distributed to heirs.

Not all property is community property, however. Property that someone owned before the marriage, or inherited during the marriage, can be considered solely that person's property as long as it was not commingled with other jointly owned marital property. And an IRA owned by a decedent may be distributed in its entirety to named beneficiaries (if the surviving spouse has in advance signed an agreement to this effect).

Ownership with Right of Survivorship

If property is held with right of survivorship, then upon an owner's death, the other owners automatically assume ownership of the decedent's share.

For instance, if a husband and wife owned a house together with right of survivorship, and the husband died, the wife would automatically own the entire house. Of course, paperwork would probably need to filed in the local deeds office to record the change, and none of this would impact any amount still owed on a mortgage. Similarly, if a husband and wife own a bank account together, the wife would automatically assume full ownership of the account upon the husband's death (and at some point would probably want to file paperwork at the bank to remove her deceased husband's name from the account).

Common examples of this type of ownership include:

• Joint Tenancy with Rights of Survivorship (JTWROS): Most states allow multiple people to own property in joint tenancy with right of survivorship, under which the remaining owners of the property automatically receive the ownership share of any owner who dies
• Tenancy by the Entirety: Very similar to JTWROS, but available only to married couple
• Community Property with Rights of Survivorship In some community property states, a married couple can opt to own certain types of property "with right of survivorship" so that the surviving spouse automatically inherits his or her partner's ownership share: AK, AZ, CA, ID, NV, WI (the specific wording of this option depends on the state)

An executor typically has no legal authority over property owned with right of survivorship, since ownership automatically transfers. That being said, an executor will often help effect the transfer by providing copies of the death certificate and filing any necessary paperwork.

Tenancy in Common

If property is held via tenancy in common, each owner owns a specified portion of the property, and that portion becomes part of that owner's estate upon his or her death.

The executor of an estate is responsible for managing the owner's portion of the property, and either selling it or distributing it to the estate heirs.

Transfer on Death

Many states allow owners to stipulate that upon their death, a specific asset should automatically transfer to named beneficiaries. Such transfers avoid probate, but the appropriate paperwork must be put in place in advance.

Common examples include:

• Retirement accounts (e.g., IRAs, 401Ks) with named beneficiaries
• Life insurance polices with named beneficiaries
• Payable on Death (POD) bank accounts
• Transfer on Death (TOD) brokerage accounts, stocks, and bonds
• Transfer on Death real estate deeds (supported in >50% the states)
• Transfer on Death vehicle registration (supported in <50% the states)

An executor typically has no legal authority over transfer-on-death property, since ownership automatically transfers. That being said, an executor will often help accomplish the transfer by providing copies of the death certificate and filing any necessary paperwork.