Home Owner Information Part 3

Taking Ownership of a Property

Real estate is becoming increasingly more valuable as more and more people are buying for personal or investment reasons. With this in mind, the question of how to take ownership of a property is becoming extremely important. The vesting of title or the form of ownership taken will dictate who can sign documents relating to the property and who has any future rights of ownership. Future rights of ownership can include such matters as taxes (property, income, inheritance or gift), the ability to transfer the title, or any liability to creditor's claims. How the title of a property is vested can also have significant probate implications in the event of a death.

It is a good idea to consult your lawyer when trying to determine how you want to hold the title to the property you are purchasing. This is especially important if the property has multiple owners because you want to protect your rights. The following definitions will provide a basic overview of the common methods for holding title, but should not be used as legal definitions. If you require more information or a legal definition, then consult your lawyer.

Common Methods of Holding Title

Common methods of holding title include:

• Sole Ownership
• Co-ownership
• Corporation
• Partnership
• As Trustees of a Trust
• Limited Liability Companies (L.L.C)

Sole Ownership

Sole ownership is described as ownership by an individual or other capable of acquiring title. Common examples of sole ownership can include: a single man/woman; an unmarried man/woman; or a married man/woman who is purchasing solely in his or her own name.

• Single Man/Woman - The individual has never been legally married.
• Unmarried Man/Woman - The individual has been previously married and is legally divorced at the time of purchase.
• Married Man/Woman Purchasing Solely in His or Her Own Name - The individual is purchasing and wants to acquire the title in his or her name only. The spouse in this case is required to legally relinquish his or her right, title, and interest in the property. This legally establishes the buyer as the sole and separate property owner.

Co-ownership

Title to property owned by two or more persons may be vested in one of the following ways:

• Community Property - A form of vesting title to property owned by a married couple (husband and wife) during their marriage which they intend to own together. The property is owned equally so both spouses are legally required to sign all documents of transfer. Both spouses have the right to dispose of their half of the community property (e.g. transfer by will). Community property is distinguished from separate property. Separate property includes property acquired before marriage, by separate gift or bequest, after legal separation, or which is agreed to be owned only by one spouse (see sole ownership).
• Joint Tenancy - A form of vesting title to property owned by two or more individuals, who may or may not be married, in equal interest, 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 specify the intention to create a joint tenancy estate. When a joint tenant passes away, title to the property is automatically transferred to the surviving joint tenant(s). This means joint tenancy property is not subject to disposition by will.
• Tenancy in Common - A form of vesting title to property owned by two or more individuals in undivided fractional interests. These fractional interests may be unequal in quantity or duration and may arise at different times. Each tenant in common owns a share of the property and is entitled to a comparable portion of the income from the property and must accept an equivalent share of expenses. Each co-tenant may sell, lease, or dispose by will that share of the property belonging to him/her.

Corporation

A legal entity that consists of one or more shareholders, but is regarded under law as having an existence separate from its shareholders.

Partnership

An association of two or more individuals who conduct business as co-owners for profit. This type of title vesting may hold title to property in the name of the partnership.

As Trustees of a Trust

A trust is an arrangement where legal title to property is transferred by the grantor to an individual called a trustee, to be held and managed by the trustee for the benefit of the beneficiary or beneficiaries specified in the trust agreement.

Limited Liability Companies (L.L.C)

A form of ownership is similar to both the corporation and the partnership, but the operating agreement determines how the L.L.C. functions and is taxed. As with the corporation, the L.L.C. existence is separate from the owners.

Note: In cases of corporate, partnership, L.L.C., or Trust ownership, required documents may include:

• Corporate articles and bylaws
• Partnership agreements
• L.L.C. operating agreements
• Trust agreements and/or certificates