What does Probate Mean?
A legal procedure done after the death of an individual and it is primarily concerned with the distribution of the deceased’s estate among the right, deserving beneficiaries.
The process is often cumbrous due to the requirement of so many filings with the court. It is often accompanied with an overwhelming amount of paperwork and can be very lengthy, sometimes dragging on for years.
Probate proceeding, in the presence of a will, include locating and authenticating the will, contacting the beneficiaries named in the will along with the close relatives including spouse, children, former spouse, children from former spouse etc. Furthermore, any mortgage or unpaid bills of the deceased are also paid off from the deceased estate and finally the estate is handed off to the beneficiary or beneficiaries named in the will.
In case of an intestacy (a situation where the deceased has no will), the estate of the deceased is distributed following the probate court of the respective state, typically to their heir or next of kin.
When someone utilizes a revocable living trust rather than a will, they can successfully avoid probate.
Who is a Tenant?
Tenant is an individual who occupies a land or a certain property rented from a landlord, property typically being a house or a shop. The tenant is expected to pay the landlord or the owner of the property monthly wages till they decide to no longer rent the property.
Two Probate and Tenant Problems You Should Know
When legally dealing with tenancy, there are different scenarios. For each scenario each state has different laws which usually depend upon the accessibility and non-accessibility of a written will. Two of the most commonly encountered tenancy issues and their related information is listed below:
Tenancy in Common
Tenancy in common means that a certain property is jointly owned by two or more individuals.
It is not necessary that the partners always have an equal ownership. One of them can have 60 percent ownership and the other can have 40 percent, But, both the owners, no matter how unequal the ownership is, are allowed to use the property.
Usually, this type of unequal ownership is found in unmarried couples, where one of the partners contributes financially more to the property than the other.
The tenants have a full legal right to transfer their share of the property to whoever they want in their lifetime, without requiring any consent or permission from the other partner.
Even after their death, each tenant reserves the right to name anyone who their desire as the owner of their share of the property, in their will. They are also free to include their share of the property in their estate plan.
However, a problem typically arises when the decedent’s share of the tenant-in-common property is titled in his name solely. In such a scenario, the decedent’s ownership interest in the home would pass through their probate estate in one of two ways, depending if the deceased had a will or not.
One of them is only applicable if the deceased had a will. In that case, the deceased’s share of the ownership will pass onto the beneficiary named in his or her will.
If no will is available, the laws of intestacy of the respective state are followed and the decedent’s share of the tenant-in-common property passes along to the decedent’s heirs at law. Spouses and children are usually first in line to inherit when a decedent doesn’t leave a will or other estate plan.
The intestacy laws of the respective state where the decedent lived at the time of death would govern if the tenant-in-common property isn’t real estate.
However, if the decedent Had a’ Revocable Living Trust’, a probate is successfully avoided and the tenant’s share would go directly to the beneficiaries named in the trust documents without involvement of a court or any legalities.
Another important thing to keep in mind is that if the decedent had any mortgage or debts or even any unpaid bills, then the decedent’s estate would not be responsible for paying off the mortgage if the loan is in joint names. The decedent’s estate can only be used to pay off debts if it was in his sole ownership.
Joint tenancy means that two individuals own a property jointly. They have equal rights to property. Joint tenancy can be used with financial accounts like bank accounts and real property too like real estate.
But, unlike tenants in common, here if one of the owners passes away, the entire title of ownership will pass to the surviving owner under the operation of law. Probate is not required in such a case. Even if one of the tenants mentions in his or her will, someone that they want to inherit their share of property, held in joint tenancy, his will is ignored and joint tenancy’s right of survivor-ship is followed.
This type of tenancy is commonly seen in married partners. This tenancy includes what we call, ‘the right of survivor-ship’ which eliminate the legacy if a tenant should try to pass their share of the property to someone else in their estate plan.
Typically, people hold property under joint tenancy to avoid probate. Where that is an enormous advantage, joint tenancy also has some downsides for example, if both the owners die together for example in a car crash, probate would be required yet again.
Saying that joint tenancy avoid probate altogether is not correct, in fact what it does is delay it. When either of the owner passes away, the survivor — typically a spouse or child — immediately becomes the owner of the entire property without any probate held at that time.
But when the survivor dies, the property still must go through probate. Also, when a property has been held in joint tenancy, the surviving owner does not get a step up in tax basis.
-In conclusion, when deciding regarding the way you want your property to be owned, either joined tenancy or tenants in common, one should have a clear understanding of its pros and cons and above all of the probate dealings which are different for both tenancies to avoid any blunders in their estate.