There are a few different ways homeowners can hold title to a property. These different methods can change how ownership interest is divided among co-owners and who that interest will be passed onto when an owner dies. Below are some of the most common ways a homeowner can hold title and how they typically work. However, the types of ownership available to you and the specifics of those types can vary depending on your state’s laws. This method for holding title is pretty straightforward. A sole owner holds title to a property in their name only; they don’t share ownership interest with anyone else. This type of ownership is most often utilized by single homeowners or married individuals who want to be the sole owner of the property. If you’re a married person buying a house without your spouse, your spouse may need to formally relinquish their right to that property by signing a quitclaim deed or otherwise waiving their spousal rights at the closing table. When a sole owner dies, who takes over ownership of the home depends on whether they had a will. If they did, the property will be passed to the heirs designated in the will. If they didn’t have a will, the home will be transferred according to state law. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are what’s known as community property states. In these states, any property obtained by one spouse during a marriage is considered to belong equally to both spouses. When it comes to homeownership, this means that both spouses hold title on the home as community property. Depending on individual state laws, this type of ownership may or may not include what’s known as “right of survivorship.” Right of survivorship means that when one owner dies, their ownership interest is automatically transferred to the living owner(s) without having to go through probate.Sole Ownership
Community Property
For example, if a husband and wife own their home together and the husband dies, the wife will automatically become the sole owner of the home.
Without right of survivorship, both spouses are free to will their share in the property to whomever they choose.
Joint Tenancy
Joint tenancy allows two or more co-owners to share equal, undivided interest in a property.
This means that each co-owner has an equal right to the entire property, with ownership interest typically split up evenly (so two co-owners would both have a 50% interest in the property, for example).
When co-owners hold title this way, they’re granted right of survivorship. This means your share can’t be willed to others and will automatically pass to your co-owner(s) upon your death.
However, depending on your state’s laws, one joint tenant may be able to unilaterally sever the joint tenancy agreement and convert it to a tenancy in common agreement (more on that below), which allows property to be willed to others.
This type of ownership is popular with married couples.
Tenancy In Common
Tenancy in common allows two or more people to co-own a property with ownership interest split up however they choose. This means that one co-owner could own a 75% interest in the property while the other owns 25%. However, all co-owners have an equal right to possess the entire property.
This type of ownership is common among unmarried couples.
With tenancy in common, each owner has a right to sell, give away or otherwise do as they wish with their ownership interest. This includes the right to will it to whomever they choose, as tenancy in common doesn’t include right of survivorship.
Tenancy By Entirety
This type of ownership is only available to married couples, and isn’t an option in every state.
With tenancy by entirety, a married couple is viewed as a single legal entity for the purposes of property ownership.
Tenancy by entirety includes right to survivorship. Each spouse needs the other’s permission before they can sell, transfer or encumber the property or their interest in it.
Living Trust
Some homeowners may decide the best way to handle the ownership of their property is to put it into a living trust.
This type of ownership means that your property is held in a trust by you, for you; you’re both the trustee and the beneficiary.
When you die, the assets in your trust will be distributed according to your instructions without having to go through probate.
It’s worth noting that when you initially close on the property or refinance it, many lenders, including Rocket Mortgage®, will only lend to people and not legal entities. The property cannot close in a trust.
As a seasoned expert in real estate and property law, I bring a wealth of knowledge and hands-on experience to shed light on the various ways homeowners can hold title to a property. My expertise extends to the nuances of property ownership, legal implications, and the intricacies of how different methods can impact co-owners and inheritance.
Now, delving into the concepts presented in the article, let's break down the key elements:
Sole Ownership:
Sole ownership is a straightforward method where an individual holds title to a property in their name only. This is commonly chosen by single homeowners or married individuals seeking sole ownership. In the event of the sole owner's death, the transfer of ownership depends on the presence of a will. If there is a will, the property goes to the heirs designated; if not, state law governs the transfer.
Community Property:
Community property is a unique ownership structure recognized in specific states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, property acquired during a marriage is considered jointly owned. The concept of "right of survivorship" is significant here; when one spouse dies, their ownership automatically transfers to the surviving spouse without going through probate.
Joint Tenancy:
Joint tenancy involves two or more co-owners sharing equal, undivided interest in a property. Each co-owner has an equal right to the entire property, and right of survivorship ensures that upon the death of one owner, the ownership automatically passes to the surviving co-owner(s). However, some states allow a joint tenant to unilaterally sever the agreement and convert it to a tenancy in common.
Tenancy In Common:
Tenancy in common allows co-owners to split ownership interest as they choose. Unlike joint tenancy, tenancy in common does not include right of survivorship. Each co-owner can will their share to whomever they choose, and they have the right to sell or transfer their ownership interest.
Tenancy By Entirety:
Exclusive to married couples and not available in every state, tenancy by entirety treats the couple as a single legal entity for property ownership. It includes the right of survivorship, and both spouses need each other's permission to sell, transfer, or encumber the property.
Living Trust:
Some homeowners opt for a living trust, where the property is held in a trust by the owner, who serves as both the trustee and the beneficiary. This allows for a smooth distribution of assets according to instructions without going through probate. However, it's important to note that lenders may have restrictions on closing or refinancing a property in a trust.
In conclusion, the choice of how to hold title to a property involves careful consideration of individual circ*mstances, preferences, and applicable state laws. Each method comes with its advantages and implications, highlighting the importance of informed decision-making in real estate transactions.
