Buying Property? Consider How to Hold Title

  • Jan 10 2017

By: Ted Schneider, Esq.

You are purchasing a home, and the escrow officer asks, “How do you want to hold title to the property?” In the context of your overall home purchase, this may seem like a small, inconsequential detail; however, this decision is far from trivial. A property can be owned by the same people, yet the way title is held can drastically affect each owner’s rights during their lifetime and upon their death. Below is an overview of the common ways to hold title to real estate:

Tenancy in Common
Tenants in common are two or more owners, who may own equal or unequal percentages of the property as specified on the deed. Each cotenant is entitled to share in the possession of the entire property. Any co-owner may transfer his or her interest in the property to another individual. Upon a co-owner’s death, his or her interest in the property passes to the heirs or beneficiaries of that co-owner; the remaining co-owners retain his or her same percentage of ownership. Transferring property upon the death of a co-tenant requires a probate proceeding, unless the co-tenant had a properly prepared trust.

Tenancy in common is generally appropriate when the co-owners want to leave their share of the property to someone other than the other co-tenant(s), or want to own the property in unequal shares.

Joint Tenancy
Joint tenants are two or more owners who must own equal shares of the property. Upon a co-owner’s death, the decedent’s share of the property transfers to the surviving joint tenants, not his or her heirs or beneficiaries. Transferring property upon the death of a joint tenant does not require a probate proceeding, but will require certain forms to be filed and a new deed to be recorded. Any joint tenant may sever the joint tenancy at any time by recording a deed. For example, Paul Jones, joint tenant, could deed his interest to himself as Paul Jones, tenant in common, at any time, and the other owner of the property would never know. In such event, the parties are no longer joint tenants, but are now tenants in common.

Joint tenancy is generally favored when owners want the property to transfer automatically to the remaining co-owners upon death, and want to own the property in equal shares.

Community Property

When spouses acquire property, they can take title as community property. The spouses must own equal percentages of the property. Both spouses must consent to the transfer or mortgage of the property. Upon the death of one spouse, the decedent’s portion of the property passes to the surviving spouse unless otherwise devised by will or trust.

Living Trusts
The above methods of taking title apply to properties with multiple owners. However, even sole owners, for whom the above methods are inapplicable, face an important choice when purchasing property. Whether a sole owner, or multiple co-owners, everyone has the option of holding title through a trust, which avoids probate upon the owner’s death. Once your living trust is established, the property can be transferred to you, as trustee of the living trust. The trust document names the successor trustee, who will manage your affairs upon your death, and beneficiaries who will receive the property. With a living trust, the property can be transferred to your beneficiaries quickly and economically, by avoiding the probate courts altogether. Because you remain as trustee of your living trust during your lifetime, you retain sole control of your property.

How you hold title has lasting ramifications on you, your family and the co-owners of the property. Title transfers can affect property taxes, capital gains taxes and estate taxes. If the property is not titled in such a way that probate can be avoided, your heirs will be subject to a lengthy, costly, and very public probate court proceeding. By consulting an experienced real estate attorney at Schneiders & Associates, LLP, you can ensure your rights – and those of your loved ones – are protected.

Posted in: Real Estate


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