Lessons from the Pros

Real Estate

Holding Title to Real Estate and Transferring Title

I was sent a question asking about the implications of a parent transferring title of their home to their children. I’m happy to address the question, but I will preface my answer with a couple of things: 1) How you hold title has a bearing on the legal ownership and on transfer of the property in the event of death, 2) Each situation is different and requires consultation with a financial advisor or tax consultant, 3) There are differences between states.

Let’s first exam the different ways title to property can be held.

Sole and Separate: A married man/women as his/her sole and separate property.  This is most often done when one member of the married couple is on the loan and the other is not.  Very often after the loan is closed the couple will go back to the title company and have a quitclaim deed recorded that will add the other spouse on title.

Joint Tenants with Right of Survivorship: This is the most common way title is held by married couples.  Each person owns an equal share and if one party dies, title transfers to the survivor, regardless of what a will may specify.  Joint tenancy requires four elements: Time – each owner must receive title at the same time.  Title – each owner must receive title on the same deed or document evidencing title.  Interest – each owner receives the same proportionate and equal share of ownership.  Possession – Each owner has the identical right of possession.

Tenancy in Common: Share possession equally, but may own equal or unequal shares of the property.  If one party dies, unless the surviving party is named in the will, the decedent’s interest passes to their heirs. Tenants in common share the right of possession, all tenants have the right to occupy the property and neither can exclude the other.

Community Property: Only married individuals may hold title as community property.  Upon death, half ownership transfers to the decedent’s heirs.  If you are in a community property state (such as CA), even if you acquired and held title to the property as sole and separate, it is still possible for the omitted spouse to acquire a community interest in the property.

Community Property with Right of Survivorship: When one of the married parties dies title transfers to the survivor who is on title.  However while alive both parties must agree (by signature) to sell or encumber the property.  This ownership does not allow either party to will their share of the property to anyone else.

Trust: When property is held in the name of a trust the trust owns the property.  The parties still have control and use of the property by being the trustee and beneficiary.  This is an easy way to manage and organize your assets. It allows for efficient distribution of the asset when you pass away and avoids probate.

 Corporation, Partnership or LLC:  A legal entity owns the property not individual owners. This isn’t often used with title of personal residents as it can cause additional taxes and little additional benefit.  These legal entities can be very useful for property that is held for investment purposes and by multiple owners.

Now that we are all on the same page when it comes to holding title let me address the question asked.  The transfer of title is a simple process that any title company can assist with. The owner signs a deed over to the designated individual(s).  The completions that can arise are the tax consequences of the transfer.  It is very important that all parties consult a tax professional before any change in title takes place.

Great Fortune

Diana D. Hill


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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