Estate planning often requires you to consider a number of inter-related goals at the same time. It also frequently involves the use of numerous tools and strategies to help achieve those goals. For a married couple, one of the most common estate planning concerns is ensuring that ownership of real property transfers seamlessly upon the death of one spouse. Along those lines, a common question married couples ask is “Can a married couple use joint tenancy until one spouse dies and then set up a trust for the survivor?”
Understanding Joint Ownership in Illinois
Almost any type of asset can be jointly held, including real property, financial accounts, and securities; however, there may be different characteristics for different types of jointly held assets. For example, when a bank account is jointly owned, either owner is typically able to deposit or withdraw funds. Conversely, in order to transfer securities that are jointly owned all owners must sign off on the transfer. There are also different methods by which the various assets can be held jointly. With real property, for example, individual states determine how co-owners are allowed to jointly hold title to the property. The type of title you hold will impact how your interest in the property is handled upon your death. In Illinois, the following types of joint ownership of real property are allowed:
- Tenancy in Common — if no manner of title is stated, co-ownership is presumed to be as tenants in common in Illinois. Co-owners own an undivided fractional interest in the property. Each co-owner has the right to sell, convey or transfer his/her interest in the property without the consent of the other owners. Upon the death of a co-owner, his/her interest in the property becomes part of his/her estate and is transferred via the decedent’s Will or the state intestate succession laws.
- Joint Tenancy – also referred to as “joint tenants with rights of survivorship,” the primary difference between this form of joint ownership and tenancy in common is that with joint tenancy there is a unity of ownership. As such, upon the death of one co-owner, his/her interest in the property automatically passes, outside of probate, to the remaining owners.
- Tenancy by the Entirety – this is a type of joint tenancy that is only available to married couples. A married couple using tenancy by the entirety get the benefits of joint tenancy plus some additional protection from creditors by only allowing creditors of joint debts to reach the property.
If you are married, and your goal is to ensure that real property you own with your spouse will remain out of the probate process in the event of the death of one spouse, titling the property as joint tenant with rights of survivorship or as tenants by the entirety will accomplish this goal.
Using a Trust for the Survivor
You may also wish to structure your estate plan so that you are certain your marital estate will eventually be passed down to your children by creating a trust into which the property will transfer after the death of one spouse. Why would a trust be necessary? Typically, a trust is used to protect the property in the event the surviving spouse remarries. If, for example, you are the first to go and your spouse remarries, the new spouse could gain ownership rights to the property you owned with your spouse. In the event of a divorce, that property could be subject to the division of assets in the divorce, meaning it could end up in the hands of the new spouse. To prevent that possibility, a trust can be established to protect the property for your children. Your spouse can still benefit from the use of the property during his/her lifetime; however, because title to the property is held by the trust there is no risk that the property could be lost in a divorce, bankruptcy, or otherwise encumbered.
Contact an Illinois Estate Planning Attorney
For additional information, please download our free estate planning worksheet. If you have additional questions or concerns about joint tenancy and/or about creating a trust, contact an experienced Illinois estate planning attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.