How To Hold Title?
You may wish to consult an attorney, accountant or other professional before deciding how to hold title.
|COMMUNITY PROPERTY||JOINT TENANCY WITH RIGHT OF SURVIVORSHIP||COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP||TENANCY IN COMMON|
|Requires a valid marriage between two persons.||Parties need not be married; may be more than two joint tenants.||Requires a valid marriage between two persons.||Parties need not be married; may be more than two tenants in common.|
|Each spouse holds an undivided one-half interest in the estate.||Each joint tenant holds an equal and undivided interest in the estate, unity of interest.||Each spouse holds an undivided one-half interest in the estate.||Each tenant in common holds an undivided fractional interest in the estate. Can be disproportionate, e.g.,20% and 80%; 60% and 40%; 20%, 20%, 20% and 40%; etc.|
|One spouse cannot partition the property by selling his or her interest.||One joint tenant can partition the property by selling his or her joint interest.||One spouse cannot partition the property by selling his or her interest.||Each tenant’s share can be conveyed, mortgaged or devised to a third party.|
|Requires signatures of both spouses to convey or encumber.||Requires signatures of all joint tenants to convey or encumber the whole.||Requires signatures of both spouses to convey or encumber.||Requires signatures of all tenants to convey or encumber the whole.|
|Each spouse can devise (will) one-half of the community property.||Estate passes to surviving joint tenants outside of probate.||Estate passes to the surviving spouse outside of probate.||Upon death the tenant’s proportionate share passes to his or her heirs by will or intestacy.|
|Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication.||No court action required to “clear” title upon the death of joint tenant(s).||No court action required to “clear” title upon the first death.||Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication.|
|Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death.||Deceased tenant’s share is entitled to a “stepped up” tax basis as of the date of death.||Both halves of the community property are entitled to a “stepped up” tax.||Each share has its own tax basis.|
|Note: Parties may also choose to hold title in the name of an entity, e.g., a corporation; a limited liability company; a partnership (general or limited), or a trust. Each method of taking title has certain significant legal and tax consequences; therefore, you are encouraged to obtain advice from an attorney or other qualified professional. The most common way to hold title is joint tenants with right of survivorship (JTROS).|
Sole ownership is the first way to hold title. Basically, this means that one man or one women owns 100% of the property less the value of any property liens. However, it is not quite as simple as it sounds. Sole ownership can be held several ways. If you you are unmarried, you can hold sole title as an unmarried man, or unmarried woman, or a single man or single woman. Per the dictionary definition single man seems the same as unmarried man. However, some title company personnel insist that unmarried means now single but previously married, while single means single and never married. I have not found any documentation to support this, but have run into it on several occasions.
A person may also be married but hold sole and separate property in their name only. Laws vary between states, some of which are community property states, and some of which are not. However, generally, a person may hold sole and separate title to property even if married if the property was owned prior to marriage, purchased from separately owned money, or inherited as sole and separate property. A prenuptial agreement can also identify separate property. Even if property in marriage begins as sole and separate, it can become community or joint property if separate assets are mingled. For example, if the mortgage on a separate property is paid with community money, or if separate bank accounts are merged, the property can become community. If single, no further research may be necessary. However, if you are married and trying to keep title separate, you should consult an attorney with expertise on state laws for the state you reside in.
Another form of title vesting is community property, used only in community property states, many of which developed their laws with some Spanish influence, mostly in sun belt states. Community property is a form of joint ownership for marital assets in community property states. Any property acquired during marriage using marital assets is generally considered community property in these states. Community assets are owned 50% each. As mentioned above, property owned separately, prior to marriage, can also be converted to community property using a quitclaim deed. They can also be mingled, in some cases unintentionally, resulting in all or part of the formerly separate property to become community property. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states.
Some people use joint tenancy for title vesting in order to ensure more than one party has an undivided ownership stake in real estate title. As with other forms of title vesting, a quitclaim deed can be used to create a joint tenancy when a property is acquired or to add an owner after, either due to marriage or some other reason. Joint tenancy is used for marital assets in states not using community property, and can be used in community property states as well. Joint tenants are not limited to married couples. Any 2 or more parties can become joint tenants in a single property. Joint tenancy often includes right of survivorship. This means that if one joint tenant dies, their interest reverts to the other joint tenants. This can be identified on the quitclaim deed, for example as joint tenants with rights of survivorship (JTROS) to eliminate any uncertainly as to the intent of the parties. Laws vary on joint tenancy and rights of survivorship by state, so additional local research should be done for your state to determine if this is the right form of title for your needs.
Next, tenants in common is another way to hold title. This is also an undivided interest in property among 2 or more parties, and parties can be added or removed using a quitclaim deed. The biggest difference between tenants in common and joint tenants is generally that there are no rights of survivorship. In other words, if one tenant in common dies, their interest passes on to their heirs, either by will, trust, or intestate (without a will). This form of title vesting is often useful for non-married investment partners in real estate. Also, unlike community property or joint tenancy, each tenant in common’s interest in the property need not be equal.
WAYS TO TAKE TITLE WITH ANOTHER PERSON: A COMPARISON
Please review the types of tenancies available and choose the manner in which you prefer to hold title.
When individuals who hold title together as “joint tenants” die, their interest automatically passes on to the remaining title holder(s). Men holding title together as “joint tenants” do not need to have their wives sign the deed when they sell the property. The individuals can sell their interest to another party, who would then hold title as a “tenant in common” with the remaining title holders.
Tenants in Common
When individuals hold title together as “tenants in common”, they each own an undivided interest in subject property. The individuals can sell their portion to another party, who would then hold title as a “tenant in common” with the remaining title holders. When a person who holds title as a “tenant in common” dies, his/her undivided interest passes on to their estate. Men holding title as “tenants in common” must have their wives sign the deed when they sell their interest and/or the property.
Joint Tenants with Full Rights of Survivorship
When individuals who hold title together as “joint tenants with full rights of survivorship” die, their interest automatically passes on to the remaining title holder(s). The individuals cannot sell their interest to another party. Everyone holding title together as “joint tenants with full rights of survivorship” must all sell the property together, as if they were 1 person.