How title is held for a property is an important consideration. Home title rules vary from state to state, so your options might be limited depending on your state’s laws.
“These concepts go back to common law in England, but each state adopts their own version of them,” says Jordan Lulich, a real estate attorney and licensed title agent with Lulich & Attorneys in Vero Beach, Florida.
Here are some of the most common title options, and the situations in which each would be applicable:
Sole ownership
A property with sole ownership has its title under the name of one person (the sole owner, literally).
Who it’s best for: Single people living alone or a spouse who is purchasing a property as an investment.
What to know: If a married person wants to assume full financial responsibility for a property, their spouse must typically sign a quitclaim deed, giving up their ownership rights.
Joint tenancy with the right of survivorship
Joint tenancy involves two or more individuals purchasing a property together. Each person owns an equal portion of the property.
Who it’s best for: Couples who are purchasing a property together.
What to know: Under joint tenancy, if one person dies, the other gets full ownership of the property without it passing through probate. They simply have to file an affidavit affirming that the title holder has died, along with a death certificate. There are also some cases in which a couple might not want joint tenancy, such as if one spouse has credit issues or works in a high-liability occupation. In those cases, creditors or litigants could potentially lay claim to a property that’s held in joint tenancy. Couples with one spouse in a second marriage or with children from a previous relationship might also want to avoid joint tenancy, if a parent would prefer that their interest in the property go to the beneficiaries of their estate instead of their current partner.
Tenancy in common
Under tenancy in common, multiple people can hold the home title and own the property together, but they’re able to sell their interest or pass it on to beneficiaries of their choosing after they pass away.
Who it’s best for: Tenancy in common is best for groups of people who want to purchase a property and for married couples who don’t want their share of the property to automatically transfer to their spouse. “This method is popular among people who are married for a second time, since it allows each spouse to will their share of the property to their children from their first marriage,” says Jeremy Yohe, vice president of communications for the American Land Title Association.
What to know: If you own a property via tenancy in common and don’t have a will, your share of the property will be distributed based on state probate law.
Tenants by entirety
Some states allow married couples to own a property via this title method, which gives both spouses full ownership of the property. This is most common in community property states. Creditors can’t lay claim to the property if they’re pursuing a debt that’s only owed by one of the spouses.
Who it’s best for: Married couples who live in states that allow it.
What to know: Under this method of holding title, one spouse cannot sell their share of the property without consent from the other spouse. A divorce can affect ownership and might potentially result in a court-ordered property sale.
A living trust
A trust is a legal vehicle that allows you (the trustee) to pass assets, including property, to your beneficiary after your death without going through probate.
Who it’s best for: Anyone who wants total control over what happens to their interest in a property after their death. “Trusts are also the most likely to stand up in court if your ownership is challenged,” Yohe says. “The courts see them as rock solid, as opposed to some of the other methods.”
What to know: You’ll need to hire a lawyer in order to draw up the trust, but you could save your heirs any estate taxes and court fees associated with probate. Plus, the terms of a trust are typically kept private and out of the public record.
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