Monday, June 22, 2009

How Will You Hold Title To a Property?

The manner in which title to a property is vested may be simple, such as “John Doe, a single man.” Or, it may complicated (in California, at least), such as “Jane Doe and Jane Smith, a married couple as to an undivided 2/3 interest and John Doe, Sr., a widower as to an undivided 1/3 interest, as tenants in common.” When you buy a property, you should know how the property will be held for legal purposes.

The manner in which homeowners hold title to their properties has significant legal ramifications. Consequently, it's not wise to leave this important decision to chance.

Escrow agents will ask how you would prefer the title to read. But often the question isn't posed until you near the close of the sale, and by then it may be too late to give any real thought to your options.

* Tenancy by the entirety. In most cases, this is the correct way for married couples to hold title. In fact, it is available only to married couples. [Each state may have different regulations. In California, this is known as community property.]

* Tenancy in common. Under this alternative, each person owns a set but not necessarily equal percentage. And there is no right of survivorship. Thus, the decedent's share vests with whoever is named in the will. And unless the deceased holds his share in trust, it goes through probate just like the rest of his estate.

* Joint tenancy with right of survivorship. This is similar to tenancy by the entirety, except that the property is not protected from the individual creditors of each owner. Another potential drawback is that regardless of what the deceased's will says, his share will pass to the joint tenant.

* Sole ownership. For the most part, a single, unmarried buyer will take title as the sole owner in his or her name alone. It is sometimes known as "ownership in severalty."

* Trusts. There are many types of trusts, but the revocable living trust is probably the most common and useful for holding title to real estate. You convey title to a trustee -- who can be anyone, including yourself -- who manages the property on your behalf. [Los Angeles Times]