Some years back I had a new client whose husband had recently passed away. She had gone to her broker to see about changing some things on their investment account, and was told she only had control of half of it. She was confused, and asked me why they would restrict her access to this joint account.
She kept referring to that account as the “ten-com” account, which I did not understand until I finally got her to show me the account statement. After her name and her husband’s name, it said TenCom. At that point it finally clicked in my brain what that meant: they were tenants in common.
And that is something almost nobody wants on an account, at least not when it is a husband and wife.
Tenants in common is legalese for an asset in which more than one person owns the account, but they each own a separate, undivided interest. Let me explain it another way. The alternative to tenancy in common is joint tenants with right of survivorship, usually abbreviated as JTWROS. When two people have joint ownership, if one of them dies the other one automatically owns that asset. But if they have common ownership, when one of them dies the survivor still owns their own half, but the other half belongs to the estate of the person who died.
A married couple are almost always going to want to have JTWROS, because that way if one of them passes, there is no need for probate or other complications regarding that account. In the case of this woman with the TenCom account, the way the account was being held meant, unfortunately, that she had to do a probate to clear that account.
And there was no good reason for this couple to want to have the account held commonly, instead of jointly. They had been married when Alaska was still a territory, for Heaven’s sake, when neither of them had a pot to urinate in. Neither of them had inherited assets. They earned it all together, and they definitely wanted everything going to the surviving spouse when one of them died. In all likelihood, it was just a mistake, somebody checked the wrong box when they were filling out the paperwork. Nonetheless, it was necessary to go through the costs and delays of probate.
Let me tell you another story caused by someone not understanding the difference between the different ways to hold assets. I had a client who had three children who did not necessarily get along with each other. Her main assets were a nice house and a large bank account. We set up a living trust for her and deeded the house into the trust. She could have put the account into the trust as well, but her bank was going to make her get a new account number if she did, and that would be a hassle. So as an alternative we had her make the trust the death beneficiary (also called POD) on the bank account.
And at that point everything was fine. But later, she started to have mobility issues, and it was hard for her to get around. Without telling me, she put one of her children on the bank account with her, so that he could pay bills and do other things for her. Because she didn’t understand the difference, she didn’t realize it was important that he was actually on the account as a joint owner, rather than as an authorized signer. The letters JTWROS meant nothing to her.
As a result, when she died her son automatically owned that account. And he still insisted on getting his portion of the proceeds from sale of the house as well.
One more example: Many times I have had people come into my office who want to put one or more of their kids on title to real estate with them, or perhaps have already done that on their own, thinking it would avoid probate because it would be joint with right of survivorship. That usually works in other states, but not Alaska. Years ago, the Legislature repealed joint ownership in land, except between a married couple. I don’t know how many unnecessary probates have been caused by people putting their kids on title with them, but I’m willing to bet the number is not small.
How assets are titled is the beginning point of everything in estate planning. It might not be a bad idea to check all of your assets and make sure that how they are titled is consistent with your plan.
Kenneth Kirk is an Anchorage estate planning attorney. 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. When I say, “That might not be a bad idea,” I mean, “Do it now!”
