Asset titling in the United States

 determines one's property rights during one's lifetime. How an asset is titled also determines how that asset is transferred at death. Assets can be inherited according to Will, by beneficiary designation, or based on an agreement or state law.

Definitions
Common forms of asset titling in the US (defined below) include sole ownership, various forms of joint tenancy, community property, and through revocable living trusts. Joint tenancy by the entirety and community property apply to marital property.


 * Sole ownership: Sole ownership is the most common form of property ownership. Under this title, a person or an entity solely owns all the rights and interests to an asset. If titled in one's name alone with no beneficiary, the asset passes through the probate estate upon  death. If an individual has a will, the terms of the will determine how assets will be distributed. Without a will, state intestacy law determines how assets are distributed. Intestacy laws vary from state to state and typically distribute assets to a spouse, children, parents, grandchildren, siblings, or other relatives in varying orders of preference.
 * Joint tenancy with right of survivorship: A way for two or more people to share ownership of real estate or other property. In almost all states, the co-owners (called joint tenants) must own equal shares of the property. When one joint tenant dies, the other owners automatically own the deceased owner's share. For example, if spouses own a house as joint tenants and one dies, the survivor automatically becomes full owner. Because of this right of survivorship, the property goes directly to the surviving joint tenants without the delay and costs of probate.
 * Tenancy by the entirety: A special kind of ownership that's similar to joint tenancy but is only for married couples and, in a few states, same-sex couples who have registered with the state. It is available in about half the states. Both spouses have the right to enjoy the entire property. Neither one can unilaterally end the tenancy, and creditors of one spouse cannot force a sale of the property to collect on a debt. When one dies, the survivor automatically gets title to the entire property without a probate court proceeding. Also called "tenancy by the entireties."
 * Tenancy in common: A way two or more people can own property together, in unequal shares. Each has an undivided interest in the property, an equal right to use the property, and the right to leave his or her interest upon death to chosen beneficiaries instead of to the other owners (as is required with joint tenancy). In some states, two people are presumed to own property as tenants in common unless they've agreed otherwise in writing.
 * Community property: A method of defining the ownership of property acquired during marriage, in which all earnings during marriage and all property acquired with those earnings are owned in common and all debts incurred during marriage are the responsibility of both spouses. Typically, community property consists of all property and profits acquired during marriage, except property received by inheritance, gift, or as the profits from property owned before marriage. Community property laws exist in Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, couples can create community property by written agreement.
 * Revocable trust: A trust set up during life that can be revoked at any time before death. Revocable living trusts are a common way to avoid the cost and hassle of probate, because the property held in the trust during life passes directly to the trust beneficiaries after the trust maker's death, without probate court proceedings. The successor trustee - the person appointed to handle the trust after the trust maker's death --simply transfers ownership to the beneficiaries named in the trust. Certain revocable living trusts can also reduce federal estate tax. Also called "inter vivos trust.

Taxation
Titled property held in taxable accounts is subject to the tax laws in effect at the time, and taxes must be paid annually on earnings and asset sales.

A special provision of the tax code, known as stepped-up valuation,  applies to taxable assets at death. In most instances, a property's tax basis is stepped-up to current market value. Stepped-up valuation can differ, however, depending on how the property is titled.


 * Sole ownership, and sole or separate property held in a trust. The death of the asset owner results in the asset's stepping up in value.


 * Example:


 * Fred Mason, deceased, owns stock mutual fund investments that have a tax basis of 50,000 dollars with a current market value of 100,000 dollars. Fred also has a home with a basis of 70,000 dollars and a current market value of 125,000 dollars. Both assets are held in his own name. The beneficiaries of Fred's estate will have a new stepped-up valuation of the inherited assets:


 * Stock mutual fund investments: 100,000 dollar tax basis
 * Real estate property: 125,000 dollar tax basis


 * Joint tenancy. For assets held in joint tenancy, stepped-up valuation applies only to the deceased partner's share of the property.


 * Example:


 * Fred and Mary Mason are married and hold their investment accounts and home in joint tenancy with right of survivorship. Their jointly held stock mutual fund investments have a tax basis of 50,000 dollars with a current market value of 100,000 dollars. Their  home has a basis of 70,000 dollars and a current market value of 125,000 dollars. When Fred dies, Mary inherits the assets held in joint tenancy (without probate) and has a new stepped up basis for Fred's share of the assets.


 * Stock mutual fund investments: 75,000 dollar tax basis
 * Home residence: 105,000 dollar tax basis


 * Community property. Community property steps up whenever a spousal partner dies.


 * Example:


 * Fred and Mary Mason are married and live in a community property state. They hold their investment accounts and home in community property with right of survivorship. Their stock mutual fund investments  have a tax basis of 50,000 dollars with a current market value of 100,000 dollars. Their home has a basis of 70,000 dollars and a current market value of 125,000 dollars. When Fred dies, Mary inherits the assets (without probate) and has a new stepped up basis for Fred's share of the assets.


 * Stock mutual fund investments: 100,000 dollar tax basis
 * Home residence: 125,000 dollar tax basis

Beneficiary designation
In addition to asset titling, numerous accounts and financial instruments have an additional very important feature: the power to name beneficiaries to an asset who will inherit the property after the death of the owner. Among the accounts and assets that allow the naming of beneficiaries are employer provided retirement plans, individual retirement accounts, life insurance, and annuities. Beneficiaries can include individuals, trusts, or charities.

An important consideration to keep in mind regarding naming beneficiaries on these accounts and financial instruments is that these beneficiary appointments supersede the beneficial appointments made in either a will or a trust. As a result, care should be taken to make sure that the naming of beneficiaries on these accounts is consistent with an individual's or a family's overall estate plan.

Retirement accounts
When appointing beneficiaries to retirement accounts, individuals need to be aware of special rules involving spousal rights. Complications come into play when individuals want to name non-spousal beneficiaries to plan assets. This is common among blended families and second marriages, when marital partners desire that retirement plan investments flow to children. Updating beneficiaries on retirement plans is also critical after a divorce.

Employer-provided retirement plans are governed by federal law which states that your spouse is entitled to inherit all the money in the account unless he or she signs a written waiver, consenting to your choice of another beneficiary. The consent must be witnessed by a plan representative or a notary. Prenuptial agreements are not valid.

In community property states, a spouse also has precedence over other beneficiaries with individual retirement accounts (traditional and Roth IRAs). Once again, written consent is necessary if non-spousal beneficiaries are to be valid.

Spousal beneficiaries of personal IRAs have a special right to treat an inherited plan as their own IRA. This is an important benefit, since by so doing the inheriting spouse is not required to immediately begin taking minimum distribution withdrawals. The inheriting spouse can delay distribution of a traditional IRA until required at age 70 and a half, or in the case of a Roth IRA, have no minimum distribution requirement.

Payable upon death account registration
Certain assets can use payable upon death accounts to designate beneficiaries to automatically inherit bank accounts, securities, vehicles, and real estate, without probate.

Transfer-on-death securities registration
Almost every state has adopted a law (the Uniform Transfer-on-Death Securities Registration Act) that lets you name someone to inherit your stocks, bonds or brokerage accounts without probate.