How to Take Title to Your Home

How you hold title in your home can be crucial when you decide to sell it, will it, get sued, etc. Title is not a small matter. The best option is to consult your attorney and/or your accountant.

Below we describe the pros and cons of the five most common methods of holding title in real estate.

Sole Ownership

As it says, this is when one person holds the title in their name alone. You don't have to be single to have sole ownership. Legally, this is known as ownership in severalty.

If you are married and wish to take sole ownership, usually your spouse signs a quitclaim deed giving up any ownership interest in the property.

There are no special advantages in holding title in sole ownership. When the sole owner dies, any property is subject to probate court costs and delays.

Tenants in Common

This method of holding title is used when two or more people take title to a piece of property. This is a common method of holding title when the people involved are not married to each other.

Tenants in common own a specified interest in the property. The interest can, and often is, unequal. For example, three people, or entities, could own a piece of property with one owning 40% and the other two owning 30% each. What percentage is owned by which party is specified on the deed.

The major advantage of this form of ownership is that each owner can sell or will his interest to whomever he or she wishes. Tenants in common is popular in second marriages where each spouse wants to will his or her share to the children from the first marriage.

The disadvantages of tenancy in common begin with the property being subject to probate court costs and delays. Another disadvantage is that the remaining tenant(s) could end up owning property with a stranger.

Another disadvantage is that a tenant in common can bring a partition lawsuit to force the sale of the property.

Joint Tenancy with Right of Survivorship

This form of title has some special conditions. First, all co-owners must take title at the same time. Second, all co-owners have equal shares. The surviving co-owner winds up owning the entire property. This form of title is sometimes called tenancy by the entireties when husband and wife are concerned.

After a joint tenant dies, the surviving joint tenant(s) receives the deceased's share. The deceased's will has no effect on joint tenancy property.

The big advantage to this is that the property does not go through probate, thereby avoiding cost and delays. To clear the title usually involves recording an affidavit of survivorship and a certified copy of the death certificate.

When joint tenancy is not held by husband and wife, a joint tenant can sell or give his property interest away without permission of the other tenant(s). Could be a problem. If there are only two joint tenants and one sells or gives away his interest in the property, the title becomes a tenancy in common.

Community Property

This option is available to husbands and wives only in community property states. California is a community property state. Each spouse owns half the property and can pass it on by will either to the surviving spouse or someone else.

A special advantage to community property title is that when willed to a surviving spouse , a new stepped-up basis at market value is assigned on the date of death.

This stepped-up basis advantage is also available to husbands and wives holding joint tenancy titles in community property states. It requires spouses to acknowledge in writing to each other that their joint tenancy property is also community property.

Living Trust

The living trust has become increasingly popular because property in a revocable living trust is not subject to the costs and delays of probate.

Another major advantage of the living trust is that court challenges are almost impossible, unlike the challenges to wills, which occur all to often.

All kinds of property can be held in a living trust, not just real estate: stocks, bonds, bank accounts, cars, boats, airplanes, art and any other major asset. A revocable living trust allows these assets to be bought, sold and financed normally.

We highly recommend talking to your attorney and/or accountant before deciding how to take title.