How Should I Take Title to Real Property
By Harold S. Small, J.D., CPA (inactive), AEP
The manner in which title is to be taken in real property is an issue that frequently is not thought through, and this is typically the situation for a couple, married or unmarried, and for two or more individuals. The escrow officer typically inquires as to how a buyer wants to take title and all too frequently the response from the buyer is “How do most people do it?” In reality, counsel from an attorney with knowledge in this area can be very helpful.
The most common forms of joint ownership include joint tenancy, community property, and tenancy in common.
Joint tenancy is a form of ownership for two or more individuals where each has an undivided equal ownership interest and the survivor(s) obtain the ownership of a joint tenant that dies. Estate planning documents (wills and trusts) do not control the disposition of the interest of the decedent in real property when it is held in joint tenancy.
Community property involves the ownership by spouses, each as to an undivided interest. A deceased spouse has the ability to indicate who receives his/her interest in the property in a will. In the alternative, if the property has been conveyed to a living ( inter vivos ) trust, then the terms of that document will direct who inherits the property or has rights to it. There is also a concept of community property with a right of survivorship, again between spouses, with the ability for title to pass upon death to the surviving spouse (similar to joint tenancy).
Tenancy in common is the ownership of property by two or more individuals and their respective ownership rights may be unequal. Each tenant in common has the ability to convey his/her/its interest in property to whomever desired by a will or trust.
The most preferable title holding for anyone is in a living (sometimes referred to as inter vivos ) trust. The benefit of holding title in a trust is that the property is not subject to probate administration and can be administered without the need for a conservatorship if a person becomes incompetent.
There are some tax savings benefits (e.g. a step up in basis) that are available in some circumstances. An attorney with knowledge in this area should be consulted to best understand how to take title to property and the benefits of the different forms of ownership as well as the costs associated with each.
This discussion is intended to provide a very basic understanding of title in property issues. Each individual has special needs and each property has its own issues, so there should not be inferred from this article that a particular form of title is appropriate in all circumstances. You should consult with an attorney regarding these concepts before using them or relying on them.
We assist clients in dealing with understanding how to take title to property and provide guidance relating to the acquisition of property as well as guidance concerning estate planning, survivorship issues, asset distribution matters and the tax implications of the different choices.
THE FOREGOING CONCEPTS AND IDEAS ARE GENERAL STATEMENTS AND ARE INTENDED TO PROVIDE CONCEPTS FOR CONSIDERATION IN BUSINESS AND TAX PLANNING. CAREFUL CONSIDERATION NEEDS TO BE GIVEN BY THE READER REGARDING THE USE AND APPLICATION OF THE CONCEPTS. YOUR LEGAL AND TAX COUNSEL SHOULD BE CONSULTED BEFORE THE IMPLEMENTATION OF ANY OF THE IDEAS INDICATED HEREIN OR USE OF THE INFORMATION CONTAINED ABOVE. SHOULD YOU HAVE QUESTIONS REGARDING THIS MATTER, HAROLD S. SMALL, ESQ., CAN BE REACHED AT 12526 HIGH BLUFF DRIVE, SUITE 300 , SAN DIEGO, CALIFORNIA 92130 OR AT 858.759.4600.
© 2011 by Harold S. Small, J.D., CPA (inactive) , AEP