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How Should You Hold Title to Your Home?

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The manner in which your title is held, also known as “title vesting,” refers to your legal rights to the home you own. You might not think about title vesting amid so many other decisions to make during the homebuying process, but it affects your legal right to sell or refinance your home and what happens to the property after you die.

What is property title?

Property title is ownership in a home, which gives you the right to use the property as you wish. Once you have property title, you can make changes to the home, or transfer some or all of your ownership (or “interest”) to someone else.

Why title vesting is important

The manner in which your title is held creates a road map for what happens to a property should one or multiple owners pass away. Here are some key reasons vesting in real estate is so important:

It guides the payment of home sale profits after you die. If you want your home sold after your death, the funds from the sale will be divided, in part, based on how you held title at your death. If you have a trust or a will, you can allocate a certain percentage of funds to different family members.

It indicates what happens with the property after your death. Whether you want your home to go to your spouse after you die or to a great-grandchild in the future, title vesting provides guidance to survivors about what should happen to the property.

It determines who gets tax benefits if one owner dies. This is most likely an issue with tenants in common title vesting (which we’ll explain in the next section), where title and interest to the property can be divided up unevenly. If you don’t spell out the details, your heirs could end up fighting a court battle over who gets which ownership benefits.

It may prevent probate. One overall goal of choosing ownership vesting is to avoid probate, which involves a court deciding how to transfer ownership after the current owners die. In order to avoid probate after both owners die, it’s important to either add heirs with rights of survivorship to title before you die or have a trust prepared that outlines your last wishes.

5 different types of title vesting

Choosing the manner in which your title is held depends on why you’re buying a home, what you’re using it for and what you want to happen to the property when you die. Each option gives you certain rights while you own the home and provides direction for what happens if you or another owner dies.

Here are some of the most common types of title vesting:

1. Joint tenancy with right of survivorship (JTWROS)

This is often touted as the best title vesting for most married couples, but it also applies to family members planning to own a property together. Joint tenancy with rights of survivorship gives everyone equal ownership rights that automatically pass on to survivors in the event of an owner’s death.

When you hold property title with someone who has the right of survivorship, you can’t divide up the ownership unequally. Under this type of vesting, the owners don’t have to be married, and any number of persons can own the property together.

2. Community property with right of survivorship

This type of vesting is only for married couples. It’s very important to disclose your marital status with title vesting in any form: You could end up giving up property rights to a spouse in divorce court if you purchase a property without disclosing you are married.

Marital status disclosure is especially important if you live in one of the nine community property states in the U.S. — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, community property laws could dictate who gets what real estate in the event of a divorce.

3. Tenancy in common

Tenancy in common allows you to divide up the interest unequally, and any number of people can hold title. You can negotiate how much interest you have based on the criteria you set.

You’ll need to decide who gets the tax benefits of ownership and divvy up who pays what percentage of the property tax bill. Your local treasurer’s office won’t divide up property tax bills like a restaurant order, and the IRS usually doesn’t get involved in deciding on who gets the tax write-offs related to homeownership.

Unlike JTWROS, when a tenant in common dies, property rights don’t automatically go to the other owners. It either goes to the deceased owner’s heirs or to a probate court if there’s no will — that’s why it’s so important to create a will after buying a home.

4. Sole ownership

This is precisely what it sounds like: One person owns all rights, title and interest to the property. A married person can hold title “sole and separate” from a spouse, meaning the spouse doesn’t lay claim to ownership of the property.

If the sole owner dies, the property is passed on to heirs listed in a will. If there’s no will, a probate court determines how it will be transferred.

5. Living trust

A trust outlines what will happen to the interest in the property if one trustor dies. Lenders require proof that there are no provisions of the trust that could affect their ability to foreclose on your home if you default on your mortgage.

Having a living trust lays out a clear path to your intentions for what happens to the real estate you own after you die. While title vesting gives an indication of your wishes, a living trust provides clear specific details to avoid confusion among heirs about how property rights are to be handled upon your death.

An important lending tip about trusts: Mortgage lenders only allow you to hold title in a revocable trust. The term “revocable” tells lenders you can amend or revoke the trust while you’re alive, which means you have full control over the assets included in the trust (in this case, your home). With an irrevocable trust, someone else controls the trust, which means lenders can’t foreclose on a mortgage if you default.

Pros and cons of different title vesting types

Once you know the common methods of holding title, it’s time to choose the type of title vesting you want to use. The table below summarizes the pros and cons of each title option.

Type of title vesting Pros Cons
Joint tenancy with right of survivorship (JTWROS)
  • Ownership is evenly divided
  • Only one title to the property
  • The surviving owner automatically gets the property if another owner dies
  • More than two people can own the property
  • Heirs can’t receive rights to the property before you die
  • Can’t divide up ownership unequally
Community property with rights of survivorship
  • Married couples have equal ownership
  • Individual owners can transfer ownership share with a will
  • Half of the interest can be transferred to heirs if one owner dies
  • Owners must be married
  • Ownership may be willed to an undesirable owner
  • Only applies to community property states
Tenancy in common
  • Ownership can be shared with multiple unmarried people
  • Interest can be divided unevenly
  • Individual interest can be sold separately
  • Owners’ interest can be passed down to heirs upon death
  • Ownership does not transfer automatically to other owners upon death
  • Individual ownership could end up in probate if an owner has no will
  • Must allocate who gets tax benefits
Sole ownership
  • Owner has 100% undivided interest and control over the home
  • Must have a will to transfer ownership after owner’s death
  • Could end up in probate if no will or trust is created prior to death
Trust ownership
  • You have full control over the property
  • Provides clear instructions for ownership transfer after the death of an owner
  • Requires legal fees to create the trust
  • Must disclose trust to lenders for mortgage financing

FAQs about how you hold title to your home

Can a married couple buy a house under one name? Yes. A married spouse can hold title as a “sole and separate” owner. However, the property could go to probate if the spouse dies and there is no trust or will transferring ownership to the surviving spouse.

Is a deed the same as title? No. Homeowners may use the term “deed” and title interchangeably, but a deed is different from property title. The deed is a legal document that transfers ownership from one person to another. You’ll sign a deed to take title in your name from the current owner when you buy a home. Once the signed title deed is recorded in a courthouse or assessor’s office, you become the official owner and hold title to the home.

What is the process for adding someone to title but not the mortgage? A quitclaim deed can be used to add someone to title. This gives the added owner property rights to the home with no obligation to pay the mortgage.

How do I add my spouse to the deed? If you own a home and then get married, you can add your spouse to the title with a quitclaim deed.

Important tip about quitclaim deeds and divorces: Divorcing spouses often mistakenly believe a quitclaim deed removes them from responsibility for a mortgage on a home that was owned jointly during marriage. However, unless the existing loan is refinanced or assumed by the spouse that has been awarded the home, both spouses are legally obligated to pay the mortgage. This means if one spouse is late on payments, it could affect both spouses’ credit ratings.
 

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