Ways To Hold Title: SIMPLIFIED

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 to 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:

• A man or woman who is not married.
• An unmarried man or woman who was is now legally divorced.
• A married man or woman who owns property that is being kept separate from their spouses assets.

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 owners passes away, the remaining ownership of the property passes solely to the surviving joint owner on title. The title work does not change based on the will of the deceased. The property also does not need to go through probate.

Some Facts About Joint Tenancy:

• It is only available to married couples.
• If the couple decides to sell the home, they must split the proceeds of the home equally.
• Joint tenancy is only formed through a will or a deed.
• Joint tenancy protects a surviving spouse from the deceased spouses’ creditors placing a lien against the property.

Holding title in joint tenancy is a great option for spouses who are looking to protect the assets of the property. It also protects 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 part of their estate. It then passes to heirs in accordance with their will. If they don’t have a will the property must go through probate.

Holding Title as Tenants in Common Works For:

• Many real estate investors choose to do tenancy in common. This helps protect the financial assets of all parties.
• Many couples in their second marriages choose tenancy in common. This leaves them with the option of passing their portion of the property onto their children from a previous marriage. That option applies in the event of their death.

Community Property

There are 9 states that allow title to be held in community property. There are several states where spouses may list title as both Joint Tenants and Community Property. These include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. 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:

• Holding title in a community property is only allowed if the property is acquired together by both spouses. Property that is inherited or gifted to one of the spouses cannot be listed as community property.
• Some states offer rights of survivorship with community property titles. The property would not have to go through probate. Instead, ownership would transfer solely to the spouse remaining in the marital community.
• If the surviving spouse is looking to sell the home within the first year after their spouse’s death, the home would have to go through probate. This protects the interest of the predeceased spouse.
• Community property title has the tax benefit of having a stepped up basis. This means if the property was originally bought at $100,000 but now the property is worth $500,000 the surviving spouse would receive a stepped up basis at the time of their spouse’s death. The taxable proceeds would be $0.

Living Trust

The final way to hold title is through a living trust. The trust will hold the property, 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:

• The biggest benefit is that the property avoids probate. This saves the beneficiaries from paying probate fees and waiting for it to be completed.
• In the trustee becomes incapable of making decisions regarding the property, the alternate trustee can make the appropriate decision.
• The property remains private. The transfer of ownership does not go through probate and does not have a public record. This is a huge advantage to holding title of a home in a living trust.

How to Choose the Best of the Ways 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. These events may require a transfer of title.  Ask yourself, “Who do I want to pass my home onto in the event of my death?”

• If you want your home to be given inherently to your spouse consider being joint tenants.
• If you want your children or other family members to have interest in the part consider tenancy in common.
• Be sure to list each individual you want to have interest in the property so you can ensure your wishes will be honored and all will have access to ownership.

Myths About the Ways to Hold 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. They 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. They can also give you suggestions on what type of title will benefit you.  You do have to pay for the services of the title company assisting you. However, it is not exorbitant to make title changes.

Before you purchase your next home, consider which of the ways to hold title fits your situation best. 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
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.