There are several different ways to hold title as a homeowner. Depending on your family and life circumstances you will want to choose the title that best fits your needs. The title is one of the most overlooked items during a home purchase. Many homebuyers trust that title paperwork will be handled correctly and just sign documents at closing. However, it is integral to understand the different ways you can hold title, and what will benefit you the most.
Different Ways You Can Hold Title
Sole Ownership
Holding title in your name only is considered sole ownership. It is also referred to as ownership in severalty. Sole ownership is ownership of real estate in which a single person has legal interest and ownership over the property.
Holding title in sole ownership works well in the following circumstances:
If a married person is taking title in sole-ownership, most states requires the spouse to sign a Quit-Claim Deed. The spouse signing this document acknowledges that they are giving up the rights to any ownership interest in the property.
In the case of sole ownership, if the owner of the property dies, the property must go through probate court. There aren’t any tax benefits to holding title as sole ownership.
Joint Tenants
Holding title as joint tenants insures that both parties listed as equal ownership in the property. All parties listed on title have an undivided right to the property. Joint tenancy comes with a right of survivorship. If one of the owner’s passes away, the remaining ownership of the property is given solely to the surviving joint owner on title. The title work does not change based on the will of the deceased, and the property does not need to go through probate.
Some Facts About Joint Tenancy:
Holding title in joint tenancy is a great option for spouses who are looking to protect the assets of the property and the interest of their spouse in the event of death.
Tenants in Common
Holding title as tenants in common is an option when two or more individuals own real estate. This option is typically used when co-owners are not married. The ownership of parties on title does not need to be equal. Unlike joint tenants, there is no right to survivorship with holding title as tenants in common. If one of the owners dies, their portion of the property becomes a part of their estate and is passed on in accordance to their will. If they don’t have a will the property must go through probate.
Holding Title as Tenants in Common Works For:
Community Property
There are 9 states that allow title to be held in community property. In the states of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin spouses may list their title as both Joint Tenants and Community Property. Holding title as community property indicates that each spouse owns half the property as a part of the “marital community”
Facts About Holding Title As Community Property:
Living Trust
The final way to hold title is through a living trust. The property will be held in the trust along with any other bank accounts, stocks, bonds, automobiles, real estate property or other large assets. Properties that are held in a living trust can be bought or sold normally.
Benefits of Holding Title in a Living Trust:
How to Choose the Best Way to Hold Title For You
Making the decision of how to hold title is very important. How you hold title affects your homeowner’s insurance, legal matters and property taxes. When you decide how to set up title, you want to consider what will happen in life events that require transfer of title. Ask yourself, “Who do I want to pass my home onto in the event of my death?”
Myths About Holding Title
Surprisingly, title work is the part of homeownership that people know the least about. Most rely on their lender’s referral of a title company to make decisions for them and tell them where to sign. These are the common myths about holding title.
Title Work Matches the Mortgage Borrowers
Many people falsely believe that if you are not on the mortgage, you aren’t on the title of a property. This is not true. In fact, thousands of American across the country have no mortgage on their home, but are on title. You can also list someone on your title without having them as a mortgage borrower.
You Don’t Have A Choice In How You Hold Title
Many homebuyers do not realize that they have options in how they hold title. The reality is that homeowners do have a choice in how they want to hold title and should be actively involved in determining what works best for their situation.
Holding Title is the Same in Every State
State laws can vary on how you hold title and how you can change title. Look into the specific laws of your state to see how they may vary from the standard ways of holding title.
Changing Title is a Lengthy and Expensive Process
It is possible to change title without a challenge. The easiest way to do this is to seek the help of a title company. They are professionals who can walk you through the process and give you suggestions on what type of title will benefit you. Although you do have to pay for the services of the title company assisting you, it is not exorbitant to make title changes.
Before you purchase your next home, consider how you want to hold title on the property. If you already own, look over your title paperwork and make sure if it up to date with your current life circumstances. Take the time to assess whether your title fits your needs and whether or not you need to change it.
Community Property | Joint Tenancy | Tenancy In Common | Tenancy in Partnership | Title Holding Trust | Community Property w/Right of Survivorship | Registered Domestic Partners | |
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Parties | Only Husband & Wife | Any number of persons (LLC, Husband & Wife, Domestic Partners, Trust, etc.) | Any number of persons (LLC, Husband & Wife, Domestic Partners, Trust, etc.) | Only Partners (any number of partners) | Individuals, groups of persons, corporations, living trust, etc. | Only Husband & Wife | Only partners that are registered with the secretary of State’s domestic partner registry |
Division of Interest | Owners and managerial interests are equal (except control of business is solely with managing spouse) | Ownership interest must be equal | Ownership can be divided into any number of interests equal or unequal | Ownership interest is in relation to interest in partnership | Ownership is a personal property interest and can be divided into any number of interests | Ownership and managerial interests are equal | Ownership and managerial interests are equal (except control of the business is solely with the managing domestic partner |
Title | Title is in the “Community”. Each interest is separate but management is unified. | Sale or encumbrance by joint tenant severs joint tenancy | Each co-owner has a separate legal title to his/her undivided interest | Title is in the partnership | Legal title is held by the trustee; beneficiary has equitable title | Title is in the community, management is unified | Title is in the community. Each interest is separate but management is unified. |
Possession | Both co-owners have equal management and control | Equal right of possession | Equal right of possession | Equal right of possession but only for partnership purpose | Right of Possession as specified in the trust provisions | Both Co-owners have equal management and control | Both Co-owners have equal management and control |
Conveyance | Personal property ( except “necessaries”) may be conveyed for valuable consideration without consent of other spouse; real property requires written consent of other spouse, and separate interest cannot be conveyed except upon death | Conveyance by one co-owner without the others breaks the joint tenancy | Each co-owner’s interest may be conveyed separately by its owner | Any authorized partner may convey whole partnership property for partnership purpose | Designated parties within the trust agreement authorize the trustee to convey property. Also, a beneficiary’s interest in the trust may be transferred. | Right of survivorship may be terminated pursuant to the same procedures by which a joint tenancy may be severed | Personal property (except “necessaries”) may be conveyed for valuable consideration without the consent of the other partner; real property requires written consent of the other partner, and separate interest cannot be conveyed except upon death. |
Purchaser’s Status | Purchaser can only acquire whole title of community, and cannot acquire only a part of it | Purchaser will become a tenant in common with the other co-owners in the property | Purchaser will become a tenant in common with the other co-owners in the property | Purchaser can only acquire whole title | Purchaser may obtain a beneficiary’s interest by assignment or may obtain legal and equitable title from the trust | Purchaser can only acquire while title of community and cannot acquire only part of it | Purchaser can only acquire while title of community and cannot acquire only part of it |
Successor’s Status | If passing by will, tenancy in common between devisee and survivor results | Last survivor owns property | Devisee or heirs become tenants in common | Heirs or devisees have rights in partnership interest but not specific property | Defined by the trust agreement, generally the successor becomes the beneficiary and the trust continues | Surviving spouse owns property | If passing by will, tenancy in common between devisee and survivor results |
Creditor’s Rights | for debts of either spouse, which are made before or after marriage. Whole property may be sold on execution sale to satisfy creditor | Co-owner’s interest may be sold on execution sale to satisfy his/her creditor. Joint tenancy is broken. Creditor becomes a tenant in common. |
Co-owner’s interest may be sold on execution sale to satisfy his/her creditor. Creditor becomes a tenant in common. |
Partner’s interest may be sold separately by “Charging Order” by his/her personal creditor, or his/her share of profits may be obtained by a personal creditor. Whole property may be sold on execution sale to satisfy partnership creditor |
Creditor may seek an order for execution sale of the beneficial interest or may seek an order that the trust estate be liquidated and the proceeds distributed. | Property of community is liable for debts of either which are made before or after marriage; whole property may be sold on execution sale to satisfy creditor | Property of community is liable for debts of either partner, which are made before or after registration as domestic partners. Whole property may be sold on execution sale to satisfy creditors. |
Presumption | Strong presumption that the property acquire by husband and wife is community | Must be expressly stated | Favored in doubtful cases except husband and wife | Arise only by virtue of partnership status in property placed in partnership | A trust is expressly created by an executed trust agreement | Must be expressly stated. | Must be expressly stated. |
Effect of Death | On co-owner’s death, 1/2 belongs to survivor in severalty. 1/2 goes by will to descendant’s devisee or by succession to survivor | On co-owner’s death, his/her interest ends and cannot be disposed of by will. Survivor owns the property by survivorship | On co-owner’s death, his/her interest passes by will to devisee or heirs. No survivorship rights. | On partner’s death, his/her partnership interest passes to the surviving partner pending liquidation of the partnership. Share of deceased partner then goes to his/her estate. | Successor beneficiaries may be named in the trust agreement, eliminating the need for probate. | Upon death of spouse, his/her interest passes to the surviving spouse without administration, subject to the same procedures as property held in joint tenancy. | On co-owner’s death 1/2 belongs to survivor in severalty. 1/2 goes by will to descendant’s devisee or by succession to the survivor. |
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