But when it comes to “legal” ownership of property and assets, the law often spells out who owns what. It’s important to follow the rules to protect your rights, because for many things, possession isn’t 9/10ths of the law.
Let’s look at some common examples:
JOINTLY HELD REAL ESTATE
Two sweethearts, Jane and John, pool their funds and buy a condo. They put Jane’s name on the deed (e.g. legal title) to avoid problems with potential business creditors of John. When Jane’s name is on the deed, she is the owner for legal purposes. She is legally responsible to pay real estate taxes and condo fees. In fact, both Jane and John share all expenses and mortgage payments 50/50.
- If Jane fails to pay taxes, is John responsible to pay them? No
- If Jane and John break-up and Jane wants to keep the condo, can she? Sure
- If they split up and John wants to keep the condo, can he? Sure, but he’ll either have to get Jane’s “cooperation” to take title or start a lawsuit, showing his contribution.
Moral of the Story: If you make a substantial contribution to acquire or maintain property, make sure your name is on the title. Possession isn’t 9/10ths of the law.
THE FAMILY BUSINESS
Two brothers, Paul and Stan, are 50/50 owners of a lucrative business. Each has a child who also works in the business. There is no buy-out agreement and everyone expects the kids to take over, when the time comes. When Stan dies, Paul decides he doesn’t want Stan’s kid in the business anymore and offers to pay Stan’s estate 50% of the value of the business. Can he force Stan’s kids out? Maybe! Unless Paul’s estate can prove there was an oral agreement (which is hard to prove) they may be out of luck. Here’s why:
- When Stan dies, his share of the business goes into his estate or to a person specifically named as beneficiary under his will or testamentary documents (e.g. a trust.)
- There is no automatic right for Stan’s kids to be involved in the business.
- If Stan’s kids want to stay involved, they will need “cooperation” or a lawsuit.
Moral of the Story: If you own a business interest, make sure a business agreement spells out what will happen to your interest when you die, or no longer work in the business.
FAIL TO PLAN AND THE LAW FILLS IN THE BLANKS
Often people think documents of title are not that important, because in every day life – they may not be. Does it matter if you drive a car that your husband or boyfriend owns? Maybe not. But if there’s an accident, your boyfriend is legally responsible.
If you move back to take care of Mom in her last illness and she promises that you’ll get the house in return, does it matter if title to the home is still in Mom’s name? It sure does! If title isn’t switched into joint names, and there are other beneficiaries, you may not inherit the house.
If you are making significant contributions to assets that are dear to you, make sure your name is on the title. Also keep good records of your share of payments and contributions. If you don’t get “cooperation,” at least you’ll have evidence to back up your claim of ownership.