To have and to hold (together) is not so easy in Alaska
October 1, 2020
Al Martinez was a longtime syndicated newspaper columnist. Toward the end of his career, he said that of all the controversial subjects he had written about (including a lot of articles about politics and social turmoil), the column that generated the most angry mail was when he suggested that it was perfectly okay to shave with cold water.
I haven’t been writing for the Senior Voice for anywhere near the same length of time, but this is my fifth anniversary column (the Senior Voice staff neglected to send me a cake, but I’ll deal with them later). And of the 60-odd columns I’ve written, the one that people have mentioned to me, more than any other, is when I pointed out that there is no joint tenancy in real estate in Alaska.
So today I’m going to go back to that well, and take a deeper dive.
If you want to hold a piece of real estate with another person, there are a number of different ways you can do that. How you co-own that property makes a huge difference in estate planning.
First, you can hold the property as “tenants in common”. This is not quite the same as joint tenancy, in that tenants in common do not have survivorship rights. If I own a piece of land as a common tenant with my friend, and he dies, I do not own the property. I still own my undivided half (or whatever fraction we divided it by) but his probate estate will own his half.
(Incidentally, people get confused by the use of the word “tenants”, because that usually means somebody who is renting. In this context it refers to the owners of the land).
Tenancy in common can be useful for people who are investing together, but don’t necessarily want the other one to get the property when they die. Unfortunately, it also means that the property has to go through probate (a type of court case) when either of the owners dies. I generally prefer to avoid probate, which can be very expensive and time-consuming. But if I represent one of the common owners, depending on the circumstances we may be able to tack on a transfer-on-death deed, so that the common interest of the deceased owner goes to his or her heirs without probate.
Another option is to hold the property through an entity. For instance, you can title the property in the name of a corporation or LLC, and then you own the shares of the corporation (or membership of the LLC) together. For people who are investing in real estate together, but don’t want each other to inherit, I rather like the LLC (which stands for limited liability company). It allows you to spell out the details of who is entitled to what, and even who might get the property when one of you dies. For example, you could have a provision saying that when one of you dies, the survivor has the right to buy out the other partner’s share. That way you don’t have to go through probate, and you don’t have to suddenly find yourself partnered with your old friend’s widow, or maybe his snot-nosed kid.
If the reason I want to hold property jointly is just because I want to avoid probate, a living trust can be a great option. It’s still my property, but on my death it transfers quickly and easily.
If I am married to the person I want to own the property with, we can own the property as “tenants by the entireties”. Most of the time, the deed doesn’t actually use that phrase. But if the deed says that it is owned by two people “as husband and wife” or “as a married couple” that makes them tenants by the entireties. When a married couple owns a property together in this form, and one of them dies, the other one automatically owns the property. Thus, no probate necessary.
You have to be careful with this. I have seen people buy a property together, then subsequently get married, and assume that they own the property as husband and wife. The property has to be deeded after you were married, not before.
And then we get to the big problem in Alaska law. In just about every other state, you can hold real estate as “joint tenants with right of survivorship”. When you own real estate jointly, and one of you dies, the survivor gets the property. So everywhere else in the U.S., I can put one of my kids on my property as joint owner, and when I die it will go to her automatically.
But not in Alaska. If I try to do that here, we end up as tenants in common, and then the property has to go through probate. Aside from the cost and delays, this can really mess up the estate plan if I wanted that property to go to a particular heir, but the rest of my estate (as reflected in my will) to go to other heirs. The failed survivorship provision means that half the property has to go through probate, and then it goes to those other heirs.
I can put someone other than my spouse as a joint owner on my financial accounts, my vehicles, or pretty much anything else I own (other than an IRA), but not on real estate. At least, not in Alaska.
Why do we have this strange law? I don’t know. It happened a long time ago. When they passed a law, just a few years ago, which allowed transfer-on-death deeds, the earlier drafts of the bill would have also allowed joint tenancy in real estate. But somewhere along the line in the committee process, that got stripped out. My understanding is that there was some fear that it was an attempt to get gay marriage in through the back door. But now that the courts have kicked in the front door on that one, I frankly can’t see why we don’t have an option that all the other states have.
But hey, I’m not in the Legislature.
So what’s the practical take-away here? Just this: don’t assume that what works in other states will work here. If you have a piece of real estate that you think is jointly owned with your kid, your sibling, or anyone else besides your spouse, you actually have a bomb that will go off on your death. If you’re reading this, though, there’s still time to get it fixed.
Kenneth Kirk is an Anchorage estate planning lawyer. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. For better or for worse.