A key reason DIY deeds fail is a misunderstanding of how various legal terms dictate property ownership. Simply adding a name to a deed is insufficient; the vesting (the legal status of the title) determines whether probate is avoided.
There are different forms of joint ownership in different states, and some are available only to married couples. Common types of joint ownership include the following:
- Tenants in common. If you simply add another person’s name to a property deed, the law often defaults to tenants in common. Under tenants in common, each owner generally holds a distinct, divisible share of the property. When one owner dies, their share does not automatically pass to the co-owner. Instead, the deceased owner’s share must go through probate to be distributed according to their will (or intestacy laws if there is no will), defeating the goal of avoiding probate.
- Joint tenancy with rights of survivorship. Joint tenancy with rights of survivorship is a common form of property ownership intended to avoid probate between nonspouses. When one owner dies, their share automatically passes to the surviving owner(s) without the need for probate. Often, however, depending on the rules in the particular state, the deed must contain specific language to create a joint tenancy with rights of survivorship. A DIY mistake can render this intention void.
- Tenancy by the entirety and community property with rights of survivorship. Tenancy by the entirety and community property with rights of survivorship are forms of joint ownership that are available only to married couples and only in certain states. Similar to joint tenancy with rights of survivorship, each of these provides automatic survivorship to the spouse upon the death of the other, avoiding probate. Where available, tenancy by the entirety can offer strong protection against creditors, while community property can offer other benefits.
What Should You Do?
Although adding a co-owner to a property deed can avoid probate, it is often not the best strategy. It can expose the property to the co-owner’s creditors, who can come from many sources—for example, claims by a divorcing spouse or tax liabilities. In addition, adding a co-owner can have tax and other consequences you may not anticipate. Instead of a DIY deed, consider more robust, attorney-prepared solutions, which may include various properly prepared and implemented deed options or even a revocable living trust.
If you want your home or other real estate to pass to your children or other beneficiaries without the costly delay of probate, the last thing you should do is rely on a generic, fill-in-the-blank form. Deeds are state-specific legal documents with very particular requirements. A real estate deed that is perfectly valid in one state may be completely invalid in another.
Investing a small amount in professional preparation now is the only way to ensure that the deed will be legally valid, your property will pass to your intended heirs, and you will successfully avoid the costly mistakes of a DIY job.