Closing 101: Ways to Hold Title

Ways to hold title

Your offer has just been accepted on that home you’ve been dreaming about – congratulations! 🎉 You’re ready to wrap up escrow and move on in, right? Well hold on just a moment. Along with all of the other things to consider during the escrow process is to determine how you will hold title on your new property.

No idea what I’m talking about? Let’s dig in a bit on title – what it is, why it matters and what your options are.

What is Title?

According to Wikipedia:

In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. Title is distinct from possession, a right that often accompanies ownership but is not necessarily sufficient to prove it. In many cases, possession and title may each be transferred independently of the other. For real property, land registration and recording provide public notice of ownership information.

It’s important to note that title is separate from a deed. Title is the concept while a deed is the physical certification reflecting title.

Why does it matter how Title is held?

How title is held affects the legal rights of title holders and their heirs, so having title done correctly is crucial. Before finalizing your purchase, it’s important to consult an attorney about how title should be held. Your legal advisors are the only ones who can provide you with an accurate recommendation relevant to your situation.

Ways to hold title

There are several common ways to hold title, broken down into three sub-groups.

Sole Title

1. A Single Man or Woman, an Unmarried Man or Woman or a Widow or Widower:

A man or woman who is not legally married or in a domestic partnership. How this might look on title is: Stella Smith, a Single Woman

2. A Married Man or Woman as His or Her Sole and Separate Property:

A married man or woman who wishes to acquire title in his or her name alone. This could be as part of an inheritance or a separate investment not purchased through marital assets. In this situation, the spouse would be required to relinquish their rights to title and property. How this might look on title is: Stella Smith, a Married Woman as Her Sole and Separate Property.

3. A Domestic Partner as His or Her Sole and Separate Property:

A domestic partner who wishes to acquire title in his or her name alone. This would be for the same types of situations as a married couple, but apply to those who are registered domestic partners. How this might look on title is: Stella Smith, A registered Domestic Partner, as her sole and separate property.

Joint/Common Title

Title to property owned by two or more persons may appear on title in one of the following ways:

1. Community Property:

Typically used for property owned together by married persons or by domestic partners. Community property is distinguished from separate property (see above,) which is agreed in writing to be owned by one spouse or domestic partner.

In California, real property transferred to a married person/domestic partner, is presumed to be community property, unless otherwise stated. Both parties must sign all documents to sell the property in full or use it as security for a loan. However, each party is free to sell their half of community property whenever they want. How this might look on title: Stella Smith and Steve Smith, who are married to each other, as community property; or Stella Smith and Maddie Smith, who are married to each other, as community property.

2. Community Property with Right of Survivorship:

This form of title is also for community property between spouses or domestic partners. The difference here is that it provides the for the share of one party to be transferred in full to the other upon the death of the first. This could provide tax benefits and should be discussed with your attorney and CPA. How this might look on title: Stella Smith and Steve Smith, husband and wife, as community property with right of survivorship; or Steve Smith and Michael Smith, husband and husband, as community property with right of survivorship.

3. Joint Tenancy:

Joint Tenancy works for properties owned by 2 or more people, regardless of their relationship, who have equal interests in the property. Joint tenancy provides the right of survivorship (as explained above). There are some guidelines – title must be acquired at the same time, in the same way, and the document must make clear the intent to create a joint tenancy holding. Joint tenancy is not subject to disposition by a will, as the right of survivorship is built in. How this might look on title: Stella Smith, a single woman, and Dave Smith, a married man, as joint tenants.

4. Tenancy in Common:

Tenancy in Common is similar to Joint Tenancy, in that it works for properties owned by 2 or more people. However, with Tenancy in Common, interests  can be unequal in time or amount, and may start at different times. A tenant in common essentially owns a share of the property and any income or expenses for the property will be split proportionally based on share level. Each tenant in common can sell, lease or will their share of the property belonging to them. How this might look on title: Stella Smith, a single woman, as to an undivided 60% interest and Craig Smith, a single man, as to an undivided 40%.

Other Types of Title

1. A Corporation:

A corporation is a legal entity, created under state law, consisting of one or more shareholders but considered to be a separate entity from the individual shareholders.

2. A Partnership:

A partnership is between two or more people, carrying out work for profit. Title can be held in the name of the partnership.

3. Trustees of a Trust:

A Trust is an arrangement whereby legal title to property is transferred by a 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. A trust is generally not an entity that can hold title in its own name. Instead title is often vested in the trustee of the trust. For example: Stella Smith trustee of the Smith Family Trust. (definition by California Land Title Association)

4. Limited Liability Companies (LLC):

Similar to corporations and partnerships, an LLC can hold title, which is separate from its owners. Tax implications may vary from those for a corporation.

As you can see, there are a lot of options so determining how you will hold title on your new property is critical. So don’t wait until the 11th hour. Prepare early and talk to your expert advisors on what will work best for your situation.

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

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