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Ways to Hold Title

3/31/2013

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When considering which option is best for you, consider how you want your ownership rights distributed and what you want to happen when you sell a property.  Each type of ownership has its own advantages and disadvantages.  Here is a list of basic ways to hold title, but you should contact an attorney or CPA who understands the differences as they pertain to you and your particular situation.

Sole Ownership
You can take title in your own name, which is referred to as sole ownership, or title in severalty. You can do 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 thing to note is that one who was previously married and now divorced is called an "unmarried" person while a "single" person is a person who has never been married.

Joint Tenancy
Married couples often hold title as joint tenants.  This allows 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 share of the person who died. For example, if a parent and child own a house as joint tenants and the child dies, the parent automatically becomes full owner and visa-versa. 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 lets multiple people hold title in unequal percentage shares.  Each person 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 50%, one owning 30% and one owning 20%.  Each would be able to sell or Will their own shares as they want.

Community Property (or co-ownership)
There currently are nine states that allow married people to purchase property, either together or individually, as community property. They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin 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 spouse's interest terminates once they die, 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 is less taxable gain. 

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 your life). Upon the death of the creator of the Living Trust, it becomes irrevocable (cannot be changed).  A major advantage is that court probate costs and delays are avoided because the assets in the Trust automatically pass according to the dictates of the Trust. Privacy is another major advantage in setting up a Living Trust. Also court challenges of living trusts are virtually impossible, whereas Will challenges by disappointed relatives is much more frequent.  A trust document does not become public upon the death of the trust-holder unlike a Will which 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.
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    Greg Bryan is a realtor and an attorney in San Francisco

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