Holding Title

Various Ways To Hold Title To A Property

There are several different ways to hold title to real property (a home, commercial building, etc). When considering which option is best for you, think about how the ownership rights should be dispersed and what happens when it comes time to sell the property. Each has its own advantages and disadvantages. Here are the basics, but you should contact an attorney or CPA who understands the differences as they pertain to you. In other words, we can't give you legal advice.

Joint Tenancy
In many cases, married couples hold title as joint tenants. This is a way for two or more people to share ownership. When two or more people own property as joint tenants and one owner dies, the other owners automatically own the deceased owner's share. For example, if a parent and child own a house as joint tenants and the parent dies, the child automatically becomes full owner. Because of this right of survivorship, no Will is required to transfer the property. It goes directly to the surviving joint title holders without the delay and costs of court probate.

Tenants in Common
Tenants in Common allows for multiple people to hold title in unequal percentage shares. Each has the right to sell their share, or Will their share as they want. For example, three buyers could own a property with one buyer owning 60%, one owning 30% and one owning 10%. Each would be able to sell or Will their own shares as they want.

Sole Ownership
You can take the title in your own name, which is referred to as sole ownership, or title in severalty. You can use this if you are unmarried, if you have been married but are now legally divorced or if you are currently married but want to acquire the property in your name alone. In the last case, if you are married, your spouse will have to relinquish his or her rights to the property. An interesting note is that one who was previously married and now divorced is called an "unmarried" person. A "single" person has never been married.

Living Trust
A living trust can be created only in the name of individuals who are alive. A Living Trust is like having another entity own and control your assets, including your home. That entity belongs to you, or others designated as trustees, who own the entity. While the creator of the Living Trust lives, the Trust is revocable (can be changed) during his or her life. Upon the death of the creator of the Living Trust, it becomes irrevocable (cannot be changed). Court probate costs and delays are avoided because the assets in the Trust automatically pass according to the dictates of the Trust. Privacy is a major attraction in setting up a Living Trust. Still another advantage is that court challenges of living trusts are virtually impossible, whereas Will challenges by disappointed relatives frequently occur. A trust document does not become public upon the death of the trust-holder like a Will does. Some mortgage lenders will not allow a buyer to close the transaction in a Trust. There is usually no problem with transferring it in to a Trust after the close.

Community Property (or co-ownership)
There are nine states that allow married people to purchase property, either together or individually, as community property. This basically means that each person owns 50%, but each needs to write in their Will how their share is to be divided when they die. If the ownership is community property with rights of survivorship, however, then the deceased spouses interest terminates when he/she dies, and the surviving spouse owns the entire property. A special advantage is that community property assets (such as the house) Willed to a surviving spouse receive a new "stepped-up basis" to market value on the date of death. The stepped-up basis means that when the property is eventually sold, there will be less taxable gain. As of 12/31/06, there are nine states that allow community property. They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.