Common Methods of Holding Title

The form of ownership taken and 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 California Land Title Association (CLTA) 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.

Sole Ownership

Sole ownership may be described as ownership by an individual or other entity capable of acquiring title. Examples of common vesting cases of sole ownership are:

1. A Single Man/Woman: A man or woman who is not legally marries or in a registered domestic partnership. For example: Bruce Buyer, a single man.

2. A Married Man/Woman or a Domestic Partner as His/Her Sole and Separate Property: A married man or woman or a domestic partner who wishes to acquire title in his or her name alone. The title company insuring title will require the spouse/partner of the person acquiring title to specifically disclaim or relinquish his or her right, title and interest to the property. This establishes that both spouses/domestic partners want title to the property to be granted to one spouse/partner as their 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 together by husband and wife or by domestic partners.

Community property is distinguished from separate property, which is property acquired before marriage or before a domestic partnership, by separate gift or bequest, after legal separation, or which is agreed in writing to be owned by one spouse or domestic partner. In California, real property conveyed to a married man or woman, or to registered domestic partners, is presumed to be community property, unless otherwise stated. Since all such property is owned equally, both parties must sign all agreements and documents transferring the property or using it as security for a loan. Each owner has the right to dispose of his/her one half of the community property by will. For example, Bruce Buyer and Barbara Buyer, husband and wife, as community property.

2. Community Property with Right of Survivorship: A form of vesting title to property owned together by husband and wife or by domestic partners. This form of holding title shares many of the characteristics of Community Property but adds the benefit of the right of survivorship similar to title held in joint tenancy. There maybe tax benefits for holding title in this manner. The interest must be created on or after July 1, 2001. On the death of an owner, the decedent’s interest ends and the survivor owns the property. For example, Bruce Buyer and George Buyer, registered domestic partners, as community property with right of survivorship.

3. Joint Tenancy: A form of vesting tied to property owned by two or more persons, who may or may not be married or domestic partners, in equal interests, 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, George Buyer and Barbara Buyer, as joint tenants.

4. Tenancy in Common: A form of vesting title to property owned by any two or more individuals in undivided fractional interests. These fractional interests maybe 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 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 women, 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. Trustees of a Trust*:A Trust is an arrangement where by 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, it’s 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.

This information is provided by North American Title Company. More information can be found at www.nat.com.

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