One of the most important decisions you’ll make in the home-buying process is how to hold title to the property. It’s important to give the matter special consideration because the manner in which ownership is 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, as well as significant probate implications in the event of death. It’s important to consult your attorney, estate planner or tax advisor, to determine the best way to take title.
SOLE OWNERSHIP: Sole ownership may be described as ownership by an individual or other entity capable of acquiring title. Examples of common vesting cases of sole ownership are:
A Single Man or Woman, an Unmarried Man or Woman or a Widow or Widower: A single man or woman implies a person who has never been legally married or in a domestic partnership. An unmarried man or woman implies a person who has previously been divorced but is not currently legally married or in a domestic partnership.
A Married Man or Woman as His or 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 sign/record a Quitclaim Deed, to specifically relinquish his or her right, title and interest to the property. This establishes that both spouses want title to the property to be granted to one spouse as that spouse’s sole and separate property. The same rules will apply for same sex married couples.
A Domestic Partner as His or Her Sole and Separate Property:
A domestic partner who wishes to acquire title in his or her name alone. ** As above, the title company insuring title will require the domestic partner of the person acquiring title to sign/record a Quitclaim Deed, to specifically disclaim or relinquish his or her right, title and interest to the property.
CO-OWNERSHIP: When property is owned by two or more persons and may be vested in the following forms:
Community Property is a form of vesting title to property owned together by married persons or by domestic partners. Since community property is owned equally, both parties must sign all agreements and documents transferring the property or using it as security for a loan. Each owner has the right to dispose of his/her one half of the community property by will. In California, real property conveyed to a married person, or to a domestic partner is presumed to be community property, unless stated otherwise..
Community Property with Right of Survivorship has the same definition of Community Property, with the added benefit of the right of survivorship, similar to title held in joint tenancy. Upon the death of an owner, the decedent’s ownership interest in the property is conveyed to the surviving spouse or domestic partner.
Joint Tenancy is a form of vesting title to property owned by two or more persons, who may or may not be married or domestic partners, in equal interests, 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 to the surviving joint tenant(s). The deceased’s will has no effect on joint tenancy property. A major advantage is that probate costs and delays are avoided when a joint tenant dies. The surviving joint tenant(s) usually needs only record an affidavit of survivorship and a certified copy of the death certificate to clear the title. **If a married person enters into a joint tenancy that does not include their spouse, the title company insuring title may require the spouse of the married man or woman acquiring title to specifically consent to the joint tenancy. The same rules will apply for same sex married couples and domestic partners.
Tenancy in Common is 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 (percentage) 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.
Trustees of a Trust. A Trust is an arrangement whereby legal title to property is transferred by a 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. A Trust is generally not an entity that can hold title in its own name. Instead title is often vested in the Trustee of the Trust. If you are obtaining a mortgage in connection with a home purchase, most lenders require that the Trust be revocable.
Other Forms of Ownership: The above are the most common ways to vest title although there are a few other options. For example, property may be vested to a corporation, partnership, limited liability company (LLC),
Please Note: How title is vested has important legal, financial and tax consequences. This communication is provided for information purposes only and is not intended to and should not be relied upon or construed as legal or tax advice. Please consult your attorney, estate planner or tax advisor, to determine the most advantageous manner in which to hold title to your property.