How
Should I Take Ownership of the Property I am Buying?
Real
property can be incredibly valuable and the question of how parties can take
ownership of their property is important. 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
Land Title Association (LTA) 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 LTA
has provided the following definitions of common vesting as an informational
overview. Consumers should not rely on these as 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.
Common
Methods of Holding Title:
SOLE
OWNERSHIP
Sole
ownership may be described as ownership by an individual or other entity
capable of acquiring title. Examples of common vesting in cases of sole
ownership are:
1.
A
Single Man/Woman:
A man
or woman who has not been legally married. For example: Bruce Buyer, a single
man.
2.
An
Unmarried Man/Woman:
A man
or woman who was previously married and is now legally divorced. For example:
Sally Seller, an unmarried woman.
3.
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:
1.
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 only by one
spouse.
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.
2.
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.
3.
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 the 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 Purchaser, a single woman, as to an undivided 1/4 interest,
as tenants in common.
Other
ways of vesting title include:
1.
A
Corporation*:
A
corporation is a legal entity, created under state law, consisting of one or
more shareholders but regarded under law as having an existence and personality
separate from such shareholders.
2.
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.
3.
As
Trustees of A Trust*:
A trust
is an arrangement whereby legal title to a 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.
4.
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 bylaws, 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.
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