How to Hold Title
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Title Vesting Options for Holding Title to Real Property

by Nancy Osborne, COO of ERATE®

March 14, 2007 - One of the decisions you will be required to make when purchasing a property is how you are going to hold title to the property. How one chooses to take title to real property has many consequences which may be legal, tax and estate in nature. Each state has its own legal requirements and regulations therefore the state where the property is located, as well as the state where the property owner lives, could determine the vesting options. It is likely a wise idea to consult with your attorney or tax advisor to assist you in making this important and critical decision. As an individual owner of real estate, you may take title either as a sole owner or co-owner along with others. As a sole owner, you may take title as a single person, and unmarried person or as a married person as sole and separate property. Co-owners, defined as two or more persons, could take title as community property, community property with right of survivorship, joint tenants or tenants in common. Another option available could be to hold title in a living trust.

Community Property

Currently there are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Real property that is acquired by a husband and wife, or by either one of them alone, is presumed to be community property unless otherwise stated. Each spouse has equal rights of management and control of the property and each spouse has the right and the option to dispose of one-half of the community property as they choose in their will. If one spouse does not designate someone other than their spouse in their will, then their half interest in the property reverts to the surviving spouse at the time of death without administration in the estate. However if someone other than the spouse is designated to receive their half interest in the property, then half of the property is subject to administration in the estate before ownership passes to the non-spouse or designated individual.

Community Property with the Right of Survivorship - new option

A husband and wife must specifically use this verbiage in the transfer document of a property. Then upon the death of one spouse, the property passes to the surviving spouse bypassing the probate process.

Joint Tenants

The primary characteristic of joint tenancy is the right of survivorship. When one joint tenant dies, their interest in the property is distributed equally to the surviving joint tenants, bypassing the probate process. This vesting option may apply when two or more people own property equally together. The parties do not own separate shares of the property and if one should die, then title will transfer automatically to the other surviving joint tenant. Joints tenants may or may not be married.

Tenants in Common

Under tenancy in common, two or more people own a property together and each owner may hold an interest that is unequal, for example one owner may have a 70% interest and the other a 30% interest in the property. Each co-owner may sell, convey, or mortgage their interest in the property without the consent of the other owners. Should a co-owner sell their interest, the new owner would simply become a tenant-in-common along with the other owners. The right of survivorship does not exist with tenants in common as it does with joint tenants so tenants in common can pass their share in a property to anyone they designate in their will at the time of their death.

Living Trust

Revocable living trusts can be used by both sole and co-owners of real property. The grantors of the trust maintain total control of all the assets within the trust, including the right to manage, acquire and sell a property. Upon the owner's death, the living trust permits the trustee(s) to transfer assets directly to the stated beneficiaries bypassing probate. In the event that a trustee were to become incapacitated or disabled, a successor trustee would assume management of the trust and the property without obtaining court permission or having to name a conservator or guardian.

It is important to note that no one other than an attorney or licensed tax professional should advise you as to how you should take title to a property. You should always seek qualified professional advice when making this important decision based upon your own individual circumstances and conditions.

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Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.

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