Proper Deed Drafting Can Prevent Creditors From Seizing Your Home After Your Death

NH DeedsdeedSurviving spouses of an estate have a multitude of issues to deal with when husband or wife passes.  The last thing the grieving party should have to worry about is whether they will lose their home.  Failing to title real property appropriately can have dire consequences for the surviving spouse.  This article discusses how some forethought in estate planning and deed preparation can preserve rights for a surviving spouse or partner.

Proper legal advice when counseling clients in estate planning matters includes informing them to put as much property in joint tenancy as possible to avoid requiring that property to pass through the estate.  For example, titling bank accounts, vehicles, and other personal and real property jointly will not only streamline the probate process, but it can also protect the surviving spouse or partner from having to give up property that would otherwise be theirs.

Types of Tenancy in New Hampshire

There are two types of tenancy New Hampshire recognizes: Tenants in Common and Joint Tenants with Rights of Survivorship.

RSA 477:18 provides that:

“Every conveyance or devise of real estate made to two or more persons shall be construed to create an estate in common and not in joint tenancy, unless it shall be expressed therein that the estate is to be holden by the grantees or devisees as joint tenants, or to them and the survivor of them, or unless other words are used clearly expressing an intention to create a joint tenancy. The addition, following the names of the grantees in the granting clause of a deed or devise, of the words “as joint tenants with rights of survivorship” or “as tenants by the entirety” shall constitute a clear expression of intention to create a joint tenancy.”

Tenants in Common

Tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to transfer the ownership of his or her ownership interest. This can be done by deed, will, or other conveyance.  This is the most common type of tenancy used by cohabiting or unmarried home owners. Further, Tenants in Common may hold unequal shares of the property and do not necessarily have to take title at the same time. Unlike Joint Tenants with Rights of Survivorship, with Tenancy in Common, the property is passed on to the heirs of the deceased owner.

Joint Tenants with Rights of Survivorship

Joint Tenants with Rights of Survivorship share equal ownership and have an undivided right in the property, they take title at the same time for exactly the same period of time and enjoy the same rights until one of them dies.  Upon the death of one of the joint tenants, the entire property passes to the surviving tenant.

Tenants by the Entirety

Although not recognized by common law in New Hampshire, a deed drafted with the parties taking title as Tenants by the Entirety (husbands & wives only) will default to Joint Tenants with Rights of Survivorship. As mentioned above RSA 477:18 states deeds with this language “shall constitute a clear expression of intention to create a joint tenancy.”

An exception to the general need to use clear language of tenancy with regard to motor vehicles is found under RSA 261:17 which provides that Upon the death of a married resident owner of a motor vehicle registered in this state, said motor vehicle, if used for family, shall be deemed to have been jointly held property with right of survivorship unless otherwise designated on the certificate of title, and the interest of said decedent shall pass to his or her surviving spouse.” All the surviving spouse has to do is produce the death certificate to the registry of motor vehicles and a new title in their name will be issued.

Unfortunately, real property does not have any such exception and therefore requires more care to be taken in drafting. Even if the deed specifies “Husband and Wife” but fails to specify as Joint Tenants, Joints Tenants with Rights of Survivorship or Tenants by the Entirety, the automatic default is Tenants in Common.  The disastrous result of this seemingly small error creates a half interest of that property to the estate. If the surviving spouse cannot afford to buy out the estate’s half interest he or she will have to sell the property and use the estates’ proceeds to pay the creditors their due.

To add insult to injury, not only does the surviving tenant have to give up half the interest in the property, if there is anything left to inherit, they are sixth in line behind the creditors.

RSA 554:19 outlines the priority of who gets paid first:

  • Costs and expenses of administration of the estate. These expenses include but not limited to probate court filing fees, executor or administrator fees, posting a bond, publication legal notice fees, tax preparers, property appraisal, and attorney fees.
  • Reasonable and necessary funeral, burial, and cremation expenses.
  • Debts and taxes with preference under federal law.
  • Claims made for financial and/or medical assistance provided to the deceased by the department of health and human services.
  • Just debts of the deceased. Which include all other creditors.
  • Legacies given by the will of the deceased or distribution to heirs according to law.

Titling property as Joint Tenants with Right of Survivorship gives the joint tenant some assurance against would be creditors of the estate because each one has full ownership rights.  An additional benefit when property is held as Joint Tenants with Rights of Survivorship is that property passes outside the decedents’ estate, thereby avoiding a long drawn out probate process.

If you need assistance with a deed or estate planning, please call our experienced real estate/estate planning attorneys at 1-800-240-1988.


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