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How Should I
Take Ownership of the Property I am Buying?
Real property has become increasingly more valuable and the
question of how parties can 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 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
vestings 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 vestings 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 as:
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 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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