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Ways to take Title to Real Estate

wynnatlaw — Tue, 26 Sep 2023 02:41:58 +0000

If you are considering acquiring real estate with a spouse, family member, business partner, or any other individual, you will be required to specify how title will be taken to that property. In Wisconsin, there are three ways to take title to real estate: as tenants in common, through joint tenancy, or through marital property. Each method of taking title is different and can significantly affect property rights, such as who pays for loans on the property, maintenance costs, how each owner can use or dispose of their share, and what happens to the property upon an owner’s death. Below is a brief discussion of each method:

1. Tenants in Common

Taking title to real estate as tenants in common is sometimes a deliberate choice or can be the default when no other method is specified. In a tenancy in common, two or more people can share ownership rights to real property with each owner having a right to use and possess the entire parcel, regardless of the fractional share each owner paid. So, for example, if A pays $40K and B pays $60K for the property, this does not mean that B gets to divide the property up consistent with his 60% share and exclude A from it. Rather, both A and B must share the entire property.
The 50/50 rule applies to most aspects of a tenancy in common. For example, owners are equally responsible for maintenance costs and taxes. Only one property tax bill will be issued for the parcel, thus it is the responsibility of the parties to divide costs up as they see fit. The most efficient way to do this is through a tenancy in common agreement. Further, each owner is said to own his or her interest “severally”, meaning that he or she is free to sell or dispose of his or her interest, and no consent of the other co-owner is necessary to do so. It is easy to see some of the pros and cons of a tenancy in common, compiled below:

Pros of a tenancy in common:

• Allows individuals to pool their resources so that they can afford property,

• Each party can own different sections of the property if specified by a tenancy in common agreement, and

• Property taxes and other expenses are split between all owners

Cons of a tenancy in common:

• There are no survivorship rights in a tenancy in common, which means that when one owner dies, his/her share does not pass to the other owner, but rather to the decedent’s estate,

• Each owner must share the entire parcel with the other owner, unless the parties agree otherwise, and

• Owners may end up with unanticipated co-owners as a result of each owner’s right to freely transfer or sell their interest or when one owner passes away.

2. Joint tenancy

A joint tenancy, like a tenancy in common, allows two or more people or entities to share a property equally. However, unlike a tenancy in common, joint tenants have survivorship rights, meaning that if one owner dies, his or her share passes to the remaining owner or owners.
Joint tenants, like tenants in common, must share the entire parcel with the other owners. There is still the option of drafting a joint tenancy agreement to fractionally divide each owner’s share. However, there are some unexpected nuances here. For example, if joint tenants agreed to fractionally divide the parcel and one joint tenant decides to lease his or her share, most would presume that the owner offering the lease gets to keep all proceeds from the lease. However, this is incorrect – the typical presumption is that the lease proceeds must be split 50/50 or equally with the other owners.

Pros of a joint tenancy:

• Survivorship rights when one owner dies; his or her interest passes to the remaining owner(s), thus affording the opportunity to become a sole owner,

• Each owner can own specified sections of the property if specified by a joint tenancy agreement, and

• Property taxes and other expenses are split between all owners

Cons of a joint tenancy:

• Each owner must share the parcel with the other owners, unless the parties agree otherwise, and

• Equal rights and responsibilities of all owners mean that if one owner takes a loan out against the property, all co-owners may responsible.

3. Marital property

Wisconsin, being a marital property state views all property as owned by the marriage, not each individual in it. Thus, each spouse automatically owns a ½ share of all property acquired in the marriage, unless a marital property agreement specifies otherwise. For Wisconsin transplants who have acquired property out-of-state before moving to Wisconsin, property is recognized as quasi-community property, which is complex and helps courts determine how to divide property upon divorce or death.
Marital property, like property taken in joint tenancy, has survivorship rights. In the marital context, this means that if one spouses dies, the surviving spouse receives the deceased spouse’s half of the property. A common example is a home held in title as marital property. If both spouses are on the deed to the home, then the entire home goes to the surviving spouse. Depending on each couple’s situation, this may be either a pro or a con. Some of these pros and cons are outlined below:

Pros of marital property:

• Survivorship rights: If one spouse dies, his or her share goes to the surviving spouse

Cons of marital property:

• Frustrated interests: If one spouse wants to sell, but the other does not, it can cause a gridlock on being able to sell the property. Both spouses need to agree to sell.

• Even if one spouse was the one to acquire the property at first, the other spouse may acquire a ½ share if the property is used as a primary residence or marital funds are used to pay or upkeep the property. This can be a con in the context of divorce or estate planning.

Summary:

Now that you understand the three ways co-owners can take title to property and the cons that may arise when co-owners interest become frustrated, you may be wondering what solutions are available when co-owners cannot come to an agreement.

One option is asking the court to petition the property, which will be discussed in our upcoming blog post. Stay tuned and read on!

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Do I need to update my estate planning after moving to Wisconsin?

wynnatlaw — Thu, 16 Feb 2023 17:36:34 +0000

Whenever you experience a change in circumstances, such as moving states and acquiring new property, it is always a good idea to review your estate planning with an attorney to ensure that it up to date with current state laws and reflects your current wishes. If you have recently moved to Wisconsin, that is a great time to have your estate plan reviewed. The good news is that just because you moved, does not likely mean that you will have to start over with your estate planning, but there may be some important Wisconsin-based updates needed. A Wisconsin estate planning attorney can let you know how your current plan will operate in Wisconsin and let you know if there are any provisions specific to Wisconsin laws that were not accounted for properly.

Wills

If you have a will that was drafted in a different state before moving to Wisconsin, it will still be valid so long as it satisfies Wisconsin’s requirements of a valid will. These requirements include having the will in writing and having at least two disinterested witnesses at the time of signing.

In Wisconsin, your will may be changed through a codicil, which allows an individual to make amendments or changes at any time during their life. Some reasons that you may need a codicil to your will after moving to Wisconsin include, but are not limited to, changes to property, location of assets, location of beneficiaries, etc. For example, you may need to change the executor of your will if they live out of state. This is not only for practical reasons, in that the executor may have to handle matters in the decedent’s state, but also because Wisconsin law requires nonresidents to appoint an in-state resident to accept service of process and further, non-residency itself may be enough to disqualify an executor. See Wis Stat § 856.23.

Trusts

A living trust, also known as a revocable trust, is transferrable between states. However, it is important to speak with an attorney to update your trust to include any new assets and discuss whether moving your trust’s situs, aka its home, is advisable. On the other hand, an irrevocable trust’s situs may or may not be transferrable depending on the language of the trust. You should speak with an experienced estate planning attorney to understand the implications of having your trust’s situs in or out of state.

Similar to wills, it is advisable to have your trust’s situs as your state of residency. This is because unlike wills, which are attached to a person, trusts are entities governed by their respective state’s laws. Having a trust in a state other than your state of residency may require that your successor trustee hire an attorney in the state of the trust’s situs. Speaking with an attorney regarding your trust’s situs can help you understand other implications such as state fiduciary and inheritance taxes.

Transfer on Death Deed

A transfer on death deed allows property to be transferred to your beneficiaries without going through probate. If you have an existing transfer on death deed, it may need to be tweaked to reflect Wisconsin’s marital property laws. Moving to Wisconsin may make you to reconsider who is the beneficiary of your transfer on death deed. If it is the case that the beneficiary no longer seems appropriate, then you should speak with an attorney to revoke the deed and/or draft a new one.

Powers of Attorney

Your estate planning will typically include two kinds of powers of attorney (POA) – a financial power of attorney and a heath care power of attorney. The authority of someone granted to serve as a power of attorney is acknowledged in all states. However, moving is a perfect time to re-examine your agent selection. Wisconsin has adopted the Uniform Power of Attorney Act (UPOAA), along with 25 other states, which streamlines the laws governing POA’s. So, if your POA was created in a state that has not adopted the UPOAA, your POA could be challenged, and you should consult an attorney to clarify agent and grantor responsibilities.

Contact us today for a consultation at 262-725-0175 or our website’s contact page. Wynn at Law, LLC is based in Southern Wisconsin and has three office locations: Lake Geneva, Delavan, and Salem.

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Transfer on Death Deeds eliminate probate

wynnatlaw — Thu, 10 Aug 2017 11:30:00 +0000

When any of Wynn at Law, LLC’s clients own real property in Wisconsin, we look at a Transfer on Death Deed (commonly called a TOD Deed or a TODD) to see if it is a suitable fit for their estate plan. It can sometimes wipe out the need to go to probate court, which is a time and cost saver.

If you have $50,000 or more in probate assets, probate court comes into play when distributing assets. Probate assets are all assets NOT automatically transferred to another person when the owner passes. Life insurance proceeds, for example, skip probate because a beneficiary is identified. So, if assets can avoid probate, why not place a TODD on an asset like a vacation home to transfer it directly to beneficiaries, such as the kids?

The answer in some cases is that if you need to protect assets – for or from your children – you might not want to transfer them on your death. For the minor kids, you might want to transfer the asset to a trustee for their benefit until they’re older. In the case of adult children who may have creditor problems or a looming divorce, you might again want a trustee instead of transferring the property to them directly. Otherwise, a TODD making assets ‘unprobatable’ is an alternative for every Wynn at Law, LLC client because the property doesn’t need to be owned free-and-clear. You can have a mortgage, a second mortgage, even a line of credit against the property and still use the TODD to pass it on… and skip probate.

Let’s say you had a car and some bank assets totaling $49,995 and a $89,000 getaway cabin up north. All in, the assets would require probate, but if a TODD was placed on the cabin, the cabin passes to your heirs (they still get the debt if it was mortgaged, by the way) and the rest of the estate would avoid probate because it’s under the $50,000 limit.

Your accountant, or your beneficiary’s, will point out that there may be tax benefits to this strategy as well, because the transfer isn’t considered a ‘gift’ subject to gift tax. The TODD may also reduce or eliminate capital gains taxes if and when the property is sold by the beneficiary.

Even if you have the Transfer on Death Deed, you can still choose to sell a property while you’re living: It’s yours! The TODD designation does not give the beneficiary ‘ownership’ of the property while you’re alive… if the document is drafted properly. Call an attorney.

*The content and material in this original post is for informational purposes only and does not constitute legal advice.

Photo by Ekaterina Kondratova, used with permission.

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