Wednesday, October 18, 2017

What Is the Best Way to Hold Title to Your Home?

There are three common ways in which people hold title to their property: 
  1. joint tenancy with the right of survivorship, 
  2. tenancy in common, 
  3. and tenancy by the entirety. 
Under joint tenancy with the right of survivorship all parties have equal interest. Each has a right to possession of the whole. 

At death, the interest of the decedent passes to the surviving tenant automatically. This is the right of survivorship. This ownership must be created on purpose. There is one deed, equal interest, survivorship must be defined, and there must be four unities: time, title, possession, and interest.

Each tenant has an undivided share in the whole property; is equally responsible for expenses and is equally entitled to rent and profit. The unities are terminated by one co-tenant or more than one tenant. The new owner then becomes a tenant in common.

Under tenancy in common the owners does not necessarily have equal interests. Each unit is inheritable with no right of survivorship. Tenancy in common may accidentally happen by inheritance by more than one heir; through purchase in which shares may and may not be equal; or through failure to specify joint tenancy with right of survivorship. Each tenant has undivided share in the whole property; is equally responsible for expenses and equally entitled to rent and profits. Sale by one co-tenant does not terminate the tenancy in common. The buyer succeeds to interest. Substitution occurs.

And, under tenancy by the entirety, which is created by a deed to the husband and the wife, both have an equal interest in the property and each spouse is entitled to possession of the whole. Upon divorce, the property ownership converts to a tenancy in common. Upon death, interest of the decedent passes automatically to the surviving tenant.

This form of ownership requires the four unities plus the unity of marriage. Each is equally responsible for expenses. Also, only the principal residence can be held in the entirety. One member cannot sell his or her interest. The right of survivorship is not defeated by an attempted sale and divorce converts ownership to tenancy in common.

What is common in each one of these types of ownership is that once the deed is recorded, the names of the parties in each of these forms of ownership are available to the public. If you're concerned about your privacy, you should not consider either of these forms of ownership. Rather you should consider a land trust. Under a land trust, a trustee holds title to the property for the benefit of the beneficiary. The trustee would hold legal title to the property under a deed in trust.

Nevertheless, the beneficiaries have the right of possession of the property, the income generated from the property, the income from the sale of the property, the ease of transferability, and the protection of having the property considered as personal property rather than real property. 

The name(s) of the beneficiaries can be concealed. In my judgment this is the best way to hold title to your property. Not all states have land trusts. But, if you live in Illinois, Florida, Virginia, North Dakota, Indiana, and Hawaii, you should seriously think about it.

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