Financial security is a major aspect of life, especially when loved ones are involved. You have invested your efforts and time into planning retirement. If you have children, you are also concerned about their future and financial stability.

Your real estate is a huge investment. When you pass, you want your property to go into the right hands. Joint tenancy might seem like a fair way to share the equal rights with your spouse. But if you both pass away, what happens to your real estate?

What is joint tenancy?

In Tennessee, joint tenancy is a method for holding title to property jointly in two or more names. Essentially, if one owner dies, the surviving owner automatically receives the property.

While joint tenancy is an easy way to avoid probate after the death of the first spouse, the entire estate is still probated after the surviving spouse passes. Half of the stepped-up valuation is lost in the process. The heirs of your property will have to pay hefty federal estate taxes. In summary, joint tenancy does not consider long-term goals.

Why is a trust more beneficial?

There are many advantages to owning real estate in a trust. You create a trust document, similar to a will, that names someone as a trustee after your death. You then transfer ownership of your property to yourself.

At this point, you are a trustee as well. When you pass away, the other trustee will transfer your property to whomever you designated in the trust document. Your loved ones completely avoid probate court and you can rest easy knowing they are taken care of.

Additionally, there are other advantages of owning real estate in a trust, which includes:

  • Real estate trusts avoid probate (no matter what). There are various types of real estate trusts you can choose from. A living trust ensures your heirs don’t have to go through the probate process, whether that be with real estate, cars, bank accounts, etc.
  • Real estate investment trusts can provide income. Real estate trusts take into account the type of real estate you own. Mortgage, equity and hybrid trusts ensure trustees receive income through rental payments.
  • Real estate trusts add diversity. Real estate is a nice addition to your financial portfolio. If you have invested in stocks and bonds, real estate is a risk-free way to increase returns. Overall, real estate is an excellent investment source.