|
Common Methods of Holding Title
How should I take ownership of the property I am buying?
This important question is one California real property purchasers ask their
real estate, escrow, and title professionals every day.
Unfortunately, though these professionals may identify the many methods of
owning property, they may not recommend a specific form of ownership, as doing
so would constitute practicing law.
Because real property has become increasingly more valuable, the question of
how parties take ownership of their property has gained greater importance. The
form of ownership taken - the vesting of title - will determine who may sign
various documents involving the property and future rights of the parties to the
transaction. These rights involve such matters as: real property taxes, income
taxes, inheritance and gift taxes, transferability of title and exposure to
creditor's claims. Also, how title is vested can have significant probate
implications in the event of death.
The California Land Title Association (CLTA) advises those purchasing real
property to give careful consideration to the manner in which title will be
held. Buyers may wish to consult legal counsel to determine the most
advantageous form of ownership for their particular situation, especially in
cases of multiple owners of a single property.
The CLTA has provided the following definitions of common vesting as an
informational overview. Consumers should not rely on these legal definitions.
The Association urges real property purchasers to carefully consider their
titling decision prior to closing, and to seek counsel should they be unfamiliar
with the most suitable ownership choice for their particular situation.
Sole Ownership
Sole ownership may be described as ownership by an individual or other
entity capable of acquiring title. Examples of common vestings in cases of sole
ownership are:
- A Single Man/Woman
A man or a woman who has not been legally married. For
example: Bruce Buyer, a single man.
- An Unmarried Man/Woman
A man or woman who was previously married and is
now legally divorced. For example: Sally Seller, an unmarried woman.
- A Married Man/Woman as His/Her Sole and Separate Property
A married man or woman who wishes to acquire title
in his or her name alone. The title company insuring title will require the
spouse of the married man or woman acquiring title to specifically disclaim
or relinquish his or her right, title and interest to the property. This
establishes that it is the desire of both spouses that title to the property
be granted to one spouse as that spouse's sole and separate property. For
example: Bruce Buyer, a married man, as his sole and separate property.
Co-Ownership
Title to property owned by two or more persons may be vested in the
following forms:
- Community Property
- A form of vesting title to property owned by
husband and wife during their marriage which they intend to own
together. Community property is distinguished from separate property,
which is property acquired before marriage, by separate gift or bequest,
after legal separation, or which is agreed to be owned by one spouse. In
California, real property conveyed to a married man or woman is presumed
to be community property, unless otherwise stated. Since all such
property is owned equally, husband and wife must sign all agreements and
documents of transfer. Under community property, either spouse has the
right to dispose of one half of the community property, including
transfers by will. For example: Bruce Buyer and Barbara Buyer,
husband and wife as community property.
- Community Property with Right of Survivorship
- A form of vesting title to real property owned
by husband and wife during their marriage which they intend to own
together. This form of holding title shares many characteristics of
Community Property but adds the benefit of the right of surviroship
similar to title held in joint tenancy. There may be tax benefits for
holding title in this manner. Interest must be created on or after July
1, 2001.
- On the death of a spouse, the decendent's
interest ends and the surviving spouse owns the property by survivorship
and owns the property in severalty. For example: Bruce Buyer and
Barbara Buyer, husband and wife as community property with right of
survivorship.
- Joint Tenancy
- A form of vesting title to property owned by two
or more persons, 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 expressly declare the intention to create a joint
tenancy estate. When a joint tenant dies, title to the property is
automatically conveyed by operation of law to the surviving joint
tenant(s).
- Therefore, joint tenancy property is not subject
to disposition by will. For example: Bruce Buyer and Barbara Buyer,
husband and wife as joint tenants.
- Tenancy in Common
- A form of vesting title to property owned by any
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, is entitled to a comparable portion of income from the
property and must bear an equivalent share of expenses. Each co-tenant
may sell, lease or will to his/her heir that share of the property
belonging to him/her. For example: Bruce Buyer, a single man, as to
an undivided 3/4 interest, and Penny Purchase, a single woman, as to an
undivided 1/4 interest, as tenants in common.
Other Ways Of Vesting Title Include As:
- A Corporation*
- A corporation is a legal entity, created under
state law, consisting of one or more shareholders but regarded under
state law as having an existence and personality separate from such
shareholders.
- A Partnership*
- A partnership is an association of two or more
persons who can carry on business for profit as co-owners, as governed
by the Uniform Partnership Act. A partnership may hold title to real
property in the name of the partnership.
- A Trust*
- A trust is an arrangement whereby legal title to
property is transferred by the grantor to a person called a trustee, to
be held and managed by that person for the benefit of the people
specified in the trust agreement, called the beneficiaries.
*In cases of
corporate, partnership, or trust ownership, the title company will
require that it be furnished legal documents so that it may satisfy
itself as to ownership rights of the parties to the transaction and any
limitations which may exist on the sale, transfer or encumbrance of the
property. Required documents may include corporate articles and by-laws,
certificates of partnerships, and trust agreements.
- Limited Liability Companies (L.L.C.)
- This form of ownership is a legal entity and is
similar to both the corporation and the partnership. The operating
agreement will determine how the L.L.C. functions and is taxed. Like
the corporation its existence is separate from its owners.
*In cases of corporate, partnership, L.L.C. or trust ownership-required
documents may include corporate articles and by laws, partnership
agreements, L.L.C. operating agreement and trust agreements and/or
certificates.
Remember: How title is vested has
important legal consequences. You may wish to consult an attorney to determine
the most advantageous form of ownership for your particular situation.
|
