Question: My fiancee and I have just signed a contract to purchase a house, and we expect to go to closing in late August. We do not plan to get married until the end of next year.

Is there some legal document that we need to protect each other's interest in the event a tragedy hits one of us. We both want to ensure that if one of should die, the survivor gets the property with absolutely no claims considered by family members.

Answer: For unmarried people who own property, there are two ways they can hold title. The first is called "tenants in common" and the second is "joint tenants with right of survivorship." If and when you get married, there is a third title approach, namely "tenants by the entireties".

Under the first approach -- tenants in common -- each of you would have a divisible interest in the property. Let us assume in your case that each of you will have a 50 percent interest in the property. If one of you dies, his or her interest in the property will go to a probate estate, and if you have a Last Will and Testament, your share of the property will be distributed in accordance with the instructions spelled out in that Will.

It used to be the Probate -- especially in the District of Columbia where I am located -- was a cumbersome, slow process. However, recent legislation in my area has greatly simplified the process. While the comments below may be helpful generally, you need to speak with legal counsel regarding probate, title and related issues in your community and with regard to your specific situation.

If title is held as joint tenants with right of survivorship, then on the death of one of the joint tenants, full title will vest in (go into) the survivor. The survivor would own the entire property, without having to go to Probate Court.

It seems to me that the joint-tenant approach is the one you are looking for. However, let me raise some questions for you to ponder before you make the final decision.

I am not interested in breaking up your relationship before you get married, but what happens if you find out before the marriage that you and your fiancee are not right for each other? If you should die under those circumstances, your interest in the property will automatically go to your fiancee, which may not be what you want at that time.

Furthermore, if both of you should die in a common accident, which of your heirs do you want to get the entire property? If, for example, your fiancee dies several months after you do, it is possible (under a joint tenant arrangement) that his family with inherit the property.

You might want to consider the tenant in common arrangement, coupled with a Will. Under this approach, if you die before marriage, your interest in the property will go to your heirs, as designated in your Will. Presumably, your Will would give your interest in the property to your fiancee. However, if you and your fiancee have a falling out, it is easier to change the Will than to change the title.

The Will can be unilaterally changed by you at a relatively low cost. Changing the title will require that you pay a transfer and recordation tax to the jurisdiction in which the property is located if you change title as unmarried persons.

Once you get married, however, I recommend that you have the title changed to a "tenant by the entirety" arrangement. This has the same effect as a joint tenant with right of survivorship, but creates a more sacred relationship for husband and wife that is honored by law. And there is only a minor recording fee; you do not have to pay the full transfer and recordation tax.

It is possible under some circumstances, for example, that a creditor of one of you can break a joint tenancy, in order to collect on the debt. For example, you owe $20,000 to a creditor. Your house is worth $100,000. The creditor can go to court to force the property to be sold, so that the creditor will be paid in full from the sales proceeds. Your joint tenant's interest in the property will not be impacted (although a forced sale will generally bring in less cash than through a normal sale).

On the other hand, the amount you owe the creditor -- including court costs and legal fees -- will be deducted from your share of the sales proceeds. If there is anything left -- and usually there is nothing -- it will go to you.

Generally speaking, it is almost impossible for the tenant by the entirety arrangement to be attached by a creditor of only one party to the title.

I suggest you discuss these matters with your fiancee, and with your respective lawyers, before you go to settlement. I also suggest that whichever way you hold title, you enter into a written agreement -- similar to a partnership agreement -- which spells out your respective rights and obligations. This agreement should cover at least the following issues:

• who pays the mortgage, insurance and real estate taxes;

• what happens if one of you is unable to make payments?

• if one of you should die, what will the other person do with the property?

• if one of you wants out of the relationship, what will happen with the property? Will the remaining owner be able to rent out space to a third party? Will the remaining owner be given an opportunity to purchase your interest in the property, and if so, at what price?

These are important questions, and you must discuss all this with your fiancee before you go to closing. If you cannot talk with him now, do you think you will be able to peaceably resolve differences when you are no longer talking to him?

For more articles by Benny Kass, please press here.

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Copyright 2001 Benny Kass. Posted by Realty Times with permission.

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Published: July 30, 2001

Use of this article without permission is a violation of federal copyright laws.