Natalia Vander Laan
Title to real property may be held in various ways depending on the type of owner, the interest held, and even the intended distribution after death.
Real property may be owned by an individual or by multiple people, by a business entity, by a trust, or it can be co-owned by any of those parties together.
An individual or other capable entity can own real property as the sole owner. A person can own real property as a single man or single woman, if they are not legally married or in a domestic partnership, or as a married man or married woman as his or her sole and separate property if a married person wants to hold title in his or her name only. In that situation, the title company insuring the title will likely require the other spouse to execute a quitclaim deed relinquishing his or her right in real property in order to establish that both spouses wish for the title to be granted to one spouse only as his or her sole and separate property.
Two people can own real property in various ways, but only married people or people in a domestic partnership can own it as community property or community property with right of survivorship. When owned as community property, the real property is owned equally and both parties must sign any agreements, transfers, or encumbering documents. Community property with right of survivorship has an added benefit of avoiding probate as upon the death of the first spouse or partner: the decedent’s interest terminates and the entire real property transfers to the surviving spouse or partner by operation of law. As such, community property with right of survivorship is not subject to disposition via one’s will or trust. Additionally, this form of ownership may have a tax benefit as well.
Both married couples and unmarried co-owners, whether there are two of them or more, can hold title as joint tenants with right of survivorship. This type of ownership creates equal rights to the property when the owners are alive and the survivorship right upon the death of the co-owner. That means that when one co-owner dies, their entire ownership interest transfers in equal shares to the surviving co-owners by operation of law and therefore no probate is needed. Consequently, the property owned by joint tenants is also not subject to disposition via one’s will or trust. Joint tenancy must be created at the same time, by the same conveyance, and it must expressly state the intent to create a joint tenancy estate.
The parties who wish to own undivided fractional interests, whether equal or unequal, can own real property as tenants in common. Tenancy in common not only may involve unequal interests, but also may vary in duration and may arise at different times. Each tenant in common is also entitled to the prorated share or income from the real property but is also responsible for a prorated share of expenses. Tenancy in common does not entail survivorship right. Therefore, each tenant in common who owns a share of the real property is entitled to dispose of their share during their lifetime or via their will or trust.
The ways to hold title to real property vary from state to state, but the correct way to hold title to real property is essential to achieve one’s financial and estate planning goals. It is important to consult with a financial planner, a tax professional, and an estate planning attorney to determine the type of ownership that meets all one’s financial and estate planning goals.
Natalia Vander Laan is a Minden attorney.
