|
FORMS OF OWNERSHIP: COMMON METHODS OF HOLDING TITLE
How Do I Take Ownership of the Property I Am Buying?
This important question is one California real property purchasers ask their
real estate, escrow and title professionals every day. Unfortunately, though
these professionals may identify the many methods of owning property, they may
not recommend a specific form or ownership, as doing so would constitute practicing
law.
Because real property has become increasingly more valuable, the question of
how parties take ownership of their property has gained greater importance. The
form of ownership taken - 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 property taxes, incoming 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.
The CLTA has provided the following definitions of common vestings as an information
overview. (Consumers should not rely on these as legal definitions.) The Association
urges real property purchasers to carefully consider their titling decision
prior to closing, and to seek counsel should they be unfamiliar with the most
suitable ownership choice for their particular situation.
Sole Ownership
Sole ownership may be described as ownership by an individual or other entity
capable of acquiring title. Examples of common vestings in cases of sole ownership
are:
1. A Single Man/Woman:
A man or woman who has never been legally married. For example: Bruce Buyer,
a single man.
2. An Unmarried Man/Woman:
A man or woman who was previously married and is now legally divorced. For
example: Sally Seller, an unmarried woman.
3. A Married Man/Woman as His/Her Sole and Separate Property:
A married man or woman who wishes to acquire title in his or her name alone.
The title company insuring title will require the spouse of the married man
or woman acquiring title to specifically disclaim or relinquish his or her right,
title and interest to the property. This establishes that it is the desire of
both spouses that title to the property be granted to one spouse as that spouse's
sole and separate property. For example: Bruce Buyer, a married man, as his
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 by husband and wife during their
marriage which they intend to own together. Community property is distinguished
from separate property, which is property acquired before marriage, by separate
gift or bequest, after legal separation, or which is agreed to be owned by one
spouse.
In California, real property conveyed to a married man or woman is presumed
to be community property, unless otherwise stated. Since all such property is
owned equally, husband and wife must sign all agreements and documents of transfer.
Under community property, either spouse has the right to dispose of one half
of the community property, including transfers by will. For example: Bruce Buyer
and Barbara Buyer, husband and wife as community property.
2. Joint Tenancy:
A form of vesting title to property owned by two or more persons, who may or
may not be married, in equal interest, subject to the right of survivorship
in the surviving joint tenant(s).
Therefore, joint tenancy property is not subject to disposition by will. For
example: Bruce Buyer and Barbara Buyer, husband and wife as joint tenants.
3. Tenancy in Common:
A form of vesting title to property owned by any two or more individuals is
undivided fractional interests. These fractional interests may be 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 income
from the property and must bear an equivalent share of expenses. Each co-tenant
may sell, lease or will to his/her heir that 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 woman, 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. A Trust:
A trust is an arrangement whereby 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.
* In cases of corporate, partnership or trust ownership
the title company will require that it be furnished legal documents so that
it may satisfy itself as to ownership rights of the parties to the transaction
and any limitations which may exist on the sale, transfer or encumbrance of
the property. Required documents may include corporate articles and bylaws,
certificates of partnership and trust agreements.
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 that particular
situation.
|
