Options for How to Hold Title to a Property Deed

Real Estate Agent Helping Client In Filling a Property Deed
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How you acquire the title to a property has a bearing on your legal ownership. It will also impact how the property is transferred in the event of the death of the original owner. Examples of property title types include sole, joint, or community ownership. Depending on the type of title, those involved could face tax consequences.

The laws governing property ownership may vary by the state in which you reside. As an example, some states restrict the way parties may hold a title.

Here are the most common forms of property titles, and how they differ from one another. If you're considering how to word your title, talk with a lawyer to find out exactly how your state laws and tax circumstances would apply to your potential title.

Key Takeaways

  • If you have a sole and separate deed, you are the sole owner of the property, and you may need a quitclaim deed from your spouse if you are married.
  • Joint tenants with rights of survivorship have an equal share of the property, and if one party dies, the title transfers to the survivor.
  • Tenants in common share possession but may own equal or unequal shares, and if one party dies, that person's interest passes to their heirs.
  • In community property states, community property titles give equal ownership to both parties and may or may not come with rights of survivorship.

Sole and Separate Title of a Deed

People who hold these kinds of titles are the sole owners of the property. Since many couples buy property together, these titles will often explicitly state whether the owner is single or divorced ("unmarried").

If a married couple (or any property-buying partnership) wants the property in the name of only one party, that would be an example of a sole title. The other party, which isn't on the title, doesn't share in the rights of future profits, and they may lose a voice in the control of the property. In some states, married couples who want to own real estate separately must record a quitclaim deed from one spouse to the other.

Sometimes, only one party of the two or more purchasers can qualify for the mortgage. In that event, it is common to add the omitted individual(s) by recording a quitclaim deed after closing. However, always seek legal advice because the loan may contain an alienation clause.

Joint Tenants Title of Deed With Right of Survivorship

This is also known as a traditional joint tenancy, and it bestows an equal share of the property to each party involved. If one party dies, the title transfers to the survivor, regardless of what a will may specify. Joint tenancy requires four unities:

  1. Time: Each owner must receive a title at the same time.
  2. Title: Each owner must receive the title on the same deed or document evidencing title.
  3. Interest: Each owner receives the same proportionate and equal share of ownership.
  4. Possession: Each owner has the identical right of possession.

If one of the joint tenants sells or conveys the interest created in a joint tenancy to another person, the joint tenancy is broken, and a tenancy in common is created.

The primary difference between joint tenancy and tenancy in common is that the latter lacks the right of survivorship. Joint tenants cannot stop another tenant from breaking the joint tenancy.

Tenancy in Common Title of Deed

Tenants in common share possession equally, but they may own equal or unequal shares of the home. If one party dies, that person's interest passes to heirs, rather than transferring to other parties. Tenants in common share one unity: the right of possession. All tenants in common have the right to occupy the property, and neither party can exclude the other.

Community Property Title of Deed

This kind of title is typically used by married couples. However, the application depends on the state in which you live. In community property states, like California, community property titles bestow equal ownership to both parties. This joint ownership between spouses may come into play, even if one of the parties acquires the property on their own. Both parties have the right to sell or will away their interest in the property. In separate property states, these titles and ownership laws don't apply.

Title of Deed for Community Property With Right of Survivorship

This type of title essentially combines aspects of community property titles and joint tenancy with right of survivorship titles. If one person dies, that person's share of ownership transfers to the survivor. Since there is a right of survivorship, both signatures are required to encumber or sell the home while both parties are alive. Like a joint tenancy with right of survivorship, this type of title does not allow either party to pass respective ownership to an heir.

Trust Title of Deed

With a trust and transfer title, a trustee owns the property, but it is managed for the benefit of the trustor (the person who will inherit the property). These are sometimes established in an attempt to reduce taxes on the estate in the event of death. An estate planning attorney can set up a trust that is recognized by the Internal Revenue Service (IRS).

Corporation or Partnership

It is possible to form a corporation or partnership and bestow property ownership to that entity. The legal entity owns the property, not the individual owners. The type of entity—such as a limited liability partnership (LLP), real estate investment trust (REIT), or S corporation—will carry unique tax implications. An S corporation, for example, can help owners avoid the double taxation that occurs under different corporate structures.

Always seek tax advice before forming a corporation or partnership.

Limited partnerships are managed by the general partner (or partners). The limited partners are not responsible for the debts of the partnership. Typically, the most a limited partner could lose is the limited partner's investment.