Rothman Gordon: How Should Property Be Held Between Spouses?

Ownership of Assets, Part I: How Should Property be Held Between Spouses?

One of the most frequently asked questions of an estate planner is how a married couple should hold their collective assets. A recent article by Liz Pullien Weston found on CNBC.com dealt with the limited issue of whether an inheritance received by one spouse should be shared with the other. This, of course, deals with one part of the larger issue of allocating assets between spouses. The strength of the marriage, as Ms. Weston pointed out, is of major importance, particularly when we consider that over a third of all marriages end in divorce.

Whether assets should be held jointly as tenants by the entireties, as tenants in common, or in the separate names of each spouse depends in a particular case on many factors. These factors include: whether it is a first marriage; how long the parties have been married; what assets each spouse had at the time of marriage; whether there are children of a prior marriage and the desire to protect such children; whether there are children of the marriage; the age of each spouse; the size of the collective assets of the two spouses; the nature of the assets, tangibles, real, personal, or intangibles; the desire of each spouse as to what would occur should that spouse die first either suddenly or after a prolonged illness; whether the spouses would prefer that the survivor remarry; whether there was a prenuptial or postnuptial agreement; the health of each spouse; whether the combined assets are likely to be subject to federal and/or state inheritance tax; the importance to each spouse of minimizing or avoiding entirely the taxes at death of either the first or both spouses; the profession or occupation of each spouse; the financial risks undertaken by one or both spouses; whether such assets are held in qualified retirement plans, qualified college savings plans, trusts established by parents or grandparents or in asset protection trusts; whether such assets include closely-held business or controlling interest in family enterprises; the propensity of one or both spouses to gamble or otherwise spend excessively in light of the size of the asset holdings; and who do the parties want to benefit from their property in the case of a common disaster or upon the death of the survivor.

In the following weeks we intend to look at each of these factors and their importance in deciding how and under what circumstances property should be held by the married couple in either joint names or individual names.

Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm's attorneys.

We are required by Treasury Regulations to advise that this writing is not intended as a reliance opinion and cannot be used for purposes of avoiding IRS penalties.