Home Ownership Basics: Ways to Hold Title
Title to real property may be held by individuals, either in Sole ownership or in Co-ownership. Co-ownership of real property occurs when the title is held by two or more persons. There are several variations of how a title may be held in each type of ownership.
The following brief summaries reference seven of the more common examples of Sole ownership and Co-ownership.
1. A Single Man/Woman – A Man or Woman who is not legally married.
2. An Unmarried Man/Woman – A Man or Woman who having been married is legally divorced.
3. A Married Man/Woman as His/Her Sole and Separate Property – When a married man or woman wishes to acquire title in his or her name alone. The spouse must consent, to quit claim deed or otherwise, to transfer thereby relinquishing all right, title and interest in the property.
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4. Community Property – Husbands and wives who acquire realty in the community property states of California, Nevada, Louisiana, Wisconsin, Texas, Arizona, Washington, Idaho and New Mexico can take title as community property. Each spouse then owns half the property, which can be passed by the spouse’s will either to the surviving spouse or someone else.
Under community property, both spouses have the right to dispose of one half of the community property. If a spouse does not exercise his/her right to dispose of one-half to someone other than his/her spouse, then the one half will go to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one half, that half is subject to administration in the state.
5. Joint Tenancy – A form of Co-Ownership by two or more individuals (none of which can be a corporation, partnership, Limited Liability Company or trustees of a trust in equal shares, by a title created by a single transfer, when expressly declared in the transfer to be a joint tenancy. The joint tenants must derive their title at the same time from a single transfer, share identical interests and have equal rights of possession. On the death of one Co-Tenant the survivor or survivors take no new title but hold the entire estate under the original transfer.
6. Tenancy in Common – This is a form of Co-Ownership with two or more individuals or entities. The interest of each individual or entity may or may not be stated and may not be equal. A Tenant in Common has the right to deal with its interest as it sees fit – sell, hypothecate, lease, gift, etc.
7. Trust – Title to real property may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all the management rights and responsibilities. There are many advantages to holding title in a trust, such as avoidance of probate costs and delays.
Note that there is a cost of creating a living trust and deeding real property into the living trust. If the trustor becomes incompetent, the named alternate trustor (such as a spouse or adult child) takes over management of the trust assets. When the trustor dies, the assets are distributed according to the trust’s terms.
The preceding summaries are few of the more common ways to take title to real property. For more comprehensive understanding of legal and tax consequences, appropriate consultation with your attorney and/or CPA is recommended.
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