by: Corey Schwartz

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 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:

  • 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 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:

  • 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 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:

  • 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 in the event of their death.

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:

  • 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 as the 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 spouses death the home would have to go through probate to protect 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 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:

  • 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 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?”

  • 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 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.

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