Joint Ownership in Massachusetts
What is joint ownership?
Joint ownership, sometimes referred to as joint tenancy, is another method used to avoid probate and can be done by titling accounts as held in “joint owners with rights of survivorship.” You can title almost any type of investment or bank account account or asset as “joint owners” to make sure the surviving joint owner immediately succeeds to the ownership of the account on the death of the first owner. However, there may be assets or situations that require a different approach, as discussed below.
The safeguard you can use if you don’t want or can’t make an account joint ownership…
You likely have certain assets that you either cannot name as joint owners (e.g., retirement accounts) or perhaps don’t want to name others as joint owners - for example, if you are currently unmarried and have a large investment or savings account that you’d prefer your children do not know about at this time. In such scenarios, you may want to employ a different option to make sure the assets avoid probate while still passing in accordance with your wishes.
The first alternative option applies to financial accounts and is known as either payable on death (POD) or transfer on death (TOD). In other words, instead of adding someone’s name to your existing account, you would create a death beneficiary designation so that person (or trust) would immediately gain access to the account or the percentage designated to him or her upon your death.
How does payable on death or transfer on death work?
In order to set up a POD / TOD account, you will need to notify your bank / custodian and let them know who you would like to inherit the money, cash equivalents, or investments held in the account (this named inheritor is also known as the beneficiary). Updating the POD / TOD is typically done with a short form that you have to sign and submit to the financial institution. However, many custodians (for example, Fidelity) allow you to do this online with the click of a few buttons. An advantage with this approach is that you still have complete access to the funds and can change who is the beneficiary so long as you are mentally competent. In other words, the beneficiary has no vested rights to the account as long as you're alive. Upon your death, all the beneficiary has to do to claim the account (or percentage left to him/her) is fill out some simple paperwork, provide proper identification, and a certified copy of your death certificate.
But what about my real estate …
In the state of Massachusetts, for real estate, you have a few options. You can title the deed as joint owners with rights of survivorship (as already discussed) or you can create what is known as a life estate. The life estate allows you to name “remainder beneficiaries” so that as soon as you pass away, those named persons immediately inherit the property and generally only need to record your death certificate to be able to sell or transfer the property as they wish. Of course, if you have multiple remainder beneficiaries, they will need to cooperate with each other, which may create some friction. Similar to a POD / TOD account, during your lifetime you have complete access to the real estate so long as you are living, BUT the big difference here is that the remainder beneficiaries do have a vested interest in the property as soon as you update the title to be a life estate. So you should be aware of the tax and legal implications of doing a life estate before updating your deed.
Then there’s the trust alternative, which either consists of doing a nominee trust or living trust. You should contact your estate planning attorney to fully understand the difference between these types of trust and their implications because I can’t tell you how many clients set up a nominee trust and can’t locate the schedule of beneficiaries (it’s a nightmare waiting to happen). I’ll leave that topic for another article, but just be aware that if you don’t want to do the joint ownership or the life estate title, but you do want the real estate to avoid probate after you and your spouse are gone, then the living trust is generally your best option.
Have additional questions about joint ownership or estate planning? Give me a call at (781) 202-6368 or email JLento@PerennialTrust.com.
I’m always happy to help.
Sincerely,
Joseph M. Lento, J.D.
Attorney & Owner of Perennial Estate Planning
Other helpful sources:
Carlson, Darren R. (2014). Your 1960S Tv Guide To Estate Planning. MOTIVATIONAL Press, INC.
Valerie Keene, A. (2020, November 2). Avoiding Probate in Massachusetts. www.nolo.com. https://www.nolo.com/legal-encyclopedia/massachusetts-avoiding-probate-31681.html.
LINK: https://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter1-1.html
