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Common Ways of Holding Title
How
Should I take ownership of the property I am buying?
This important question is one many real property purchasers ask their real
estate, escrow and title professionals every day. Unfortunately, though these
professionals may identify the many methods of owning property, they may not
recommend a specific form of ownership, as doing so would constitute practicing
law.
Because real property has become increasingly more valuable, the question of how
parties take ownership of their property has gained greater importance. The form
of ownership taken -- the vesting of title -- will determine who may sign
various documents involving the property and future rights of the parties to the
transaction. These rights involve such matters as: real property taxes, income
taxes, inheritance and gift taxes, transferability of title and exposure to
creditor's claims. Also, how title is vested can have significant probate
implications in the event of death.
The Land Title Association (LTA) advises those purchasing real property to give
careful consideration to the manner in which title will be held. Buyers may wish
to consult legal counsel to determine the most advantageous form of ownership
for their particular situation, especially in cases of multiple owners of a
single property.
The LTA has provided the following definitions of common vestings as an
informational overview. Consumers should not rely on these as legal definitions.
The Association urges real property purchasers to carefully consider their
titling decision prior to closing, and to seek counsel should they be unfamiliar
with the most suitable ownership choice for their particular situation.
Common Methods of Holding Title
SOLE OWNERSHIP
Sole ownership may be described as ownership by an individual or other entity
capable of acquiring title. Examples of common vestings in cases of sole
ownership are:
1. A Single Man/Woman:
A man or woman who has not been legally married. For example: Bruce Buyer, a
single man.
2. An Unmarried Man/Woman:
A man or woman who was previously married and is now legally divorced. For
example: Sally Seller, an unmarried woman.
3. A Married Man/Woman as His/Her Sole and Separate Property:
A married man or woman who wishes to acquire title in his or her name alone.
The title company insuring title will require the spouse of the married man or
woman acquiring title to specifically disclaim or relinquish his or her right,
title and interest to the property. This establishes that it is the desire of
both spouses that title to the property be granted to one spouse as that
spouse's sole and separate property. For example: Bruce Buyer, a married man, as
his sole and separate property.
CO-OWNERSHIP
Title to property owned by two or more persons may be vested in the following
forms:
1. Community Property:
A form of vesting title to property owned by husband and wife during their
marriage which they intend to own together. Community property is distinguished
from separate property, which is property acquired before marriage, by separate
gift or bequest, after legal separation, or which is agreed to be owned only by
one spouse.
Real property conveyed to a married man or woman is presumed to be community
property, unless otherwise stated. Since all such property is owned equally,
husband and wife must sign all agreements and documents of transfer. Under
community property, either spouse has the right to dispose of one half of the
community property, including transfers by will. For example: Bruce Buyer and
Barbara Buyer, husband and wife as community property.
2. Joint Tenancy
A form of vesting title to property owned by two or more persons, who may or may
not be married, in equal interest, subject to the right of survivorship in the
surviving joint tenant(s). Title must have been acquired at the same time, by
the same conveyance, and the document must expressly declare the intention to
create a joint tenancy estate. When a joint tenant dies, title to the property
is automatically conveyed by operation of law to the surviving joint tenant(s).
Therefore, joint tenancy property is not subject to disposition by will. For
example: Bruce Buyer and Barbara Buyer, husband and wife as joint tenants.
3. Tenancy in Common:
A form of vesting title to property owned by any two or more individuals in
undivided fractional interests. These fractional interests may be unequal in
quantity or duration and may arise at different times. Each tenant in common
owns a share of the property, is entitled to a comparable portion of the income
from the property and must bear an equivalent share of expenses. Each co-tenant
may sell, lease or will to his/her heir that share of the property belonging to
him/her. For example: Bruce Buyer, a single man, as to an undivided 3/4 interest
and Penny Purchaser,
a single woman, as to an undivided 1/4 interest, as tenants in common.
Other ways of vesting title include as:
1. A Corporation*:
A corporation is a legal entity, created under state law, consisting of one or
more shareholders but regarded under law as having an existence and personality
separate from such shareholders.
2. A Partnership*:
A partnership is an association of two or more persons who can carry on business
for profit as co-owners, as governed by the Uniform Partnership Act. A
partnership may hold title to real property in the name of the partnership.
3. As Trustees of A Trust*:
A trust is an arrangement whereby legal title to property is transferred by the
grantor to a person called a trustee, to
be held and managed by that person for the benefit of the people specified in
the trust agreement, called the beneficiaries.
4. Limited Liability Companies (L.L.C.)
This form of ownership is a legal entity and is similar to both the corporation
and the partnership. The operating agreement will determine how the L.L.C.
functions and is taxed. Like the corporation its existence is separate from its
owners.
*In cases of corporate, partnership, L.L.C. or trust ownership - required
documents may include corporate articles and bylaws, partnership agreements,
L.L.C. operating agreement and trust agreements and/or certificates.
Remember:
How title is vested has important legal consequences. You may wish to consult an
attorney to determine the most advantageous form of ownership for your
particular situation. |
