Individual ownership is the most basic form of ownership. Property is the sole possession of an individual owner who may sell it, give it away, pass it on using a will or trust document, or encumber it with a lien or mortgage (in the case of real estate). This is the default ownership method if only one spouse is living, but it often is used by married couples for estate equalization purposes or to keep some property separate in the case of a second marriage (particularly in community property states).

Tenancy by the entirety is similar to joint tenancy, but it’s restricted to married couples. Each spouse owns a whole interest in the property, and the property passes to the surviving spouse when the other spouse dies. Not all states recognize this form of ownership, but it can be a powerful tool. With this type of ownership, one spouse cannot pledge or mortgage the property without written permission from the other. Physicians, contractors, and others at risk for significant lawsuits often will use this method to avoid having personal residences and, in some states, bank and brokerage accounts available to creditors in case of a legal judgment. However, recent court cases have allowed federal liens to be placed on property held in this manner even if only one spouse is liable.

Tenancy in common is when property is owned by two (or more) owners with each having an equal share of the property. Unless otherwise stipulated, each owner is free to sell, give, transfer, or dispose of his or her share.

Community property is recognized in eight states—Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington, and Wisconsin. These states treat most property acquired during a marriage as half owned by each spouse. Certain items can be excluded, including property owned by a spouse before the marriage, property acquired by a spouse after legal separation, and property received by one spouse as a gift or inheritance during the marriage. In each exclusionary case, the property must be kept separate. If it is commingled, it loses its exemption. Couples moving from non-community property states can be in for a surprise if they divorce after taking up residence in a community property state.

— Former Army Capt. Phil Dyer, CFP, is deputy director, Benefits Information. For additional financial counseling, MOAA members can contact Garrett Planning Network (GPN) at (866) MOAA-GPN (662-2476) or online at www.garrettplanning.com.