Temecula's Real Estate Blog

Who Really Owns Your Property? Title, Ownership & Taxes

Every house I sell, the same question always comes up. How should I take title to the property I am buying?

There are so many ways to hold ownership or title to real estate that even real estate professionals get confused.  How you hold the ownership to your property can affect your property taxes, income taxes, inheritance and gift taxes, transferability of title, possible exposure to a creditor’s claims, and even the implication of probate in the event of death.

I advise every client to seek counsel before they decide how to take ownership. Here  are some of the possibilities of how you can hold title to your property:

Sole Ownership:

1. Single Man or Woman—a man or woman who is not legally married or in a registered domestic partnership.
2. Married man or woman as His or Her Sole and Separate Property—A married man or woman who wishes to acquire title in his or her name alone. The title company will make the spouse relinquish their right to the property.
3. A Registered Domestic Partner as His or Her Sole and Separate Property—a registered domestic partner who wishes to acquire title in his or her name alone. The title company will make the domestic partner  relinquish their right to the property.

Co-Ownership: title to property owned by two or more persons may be vested as follows:

1. Community Property—property owned together by husband and wife or domestic partners. Community property is distinguished from separate property, which is property acquired before marriage, before domestic partnership is established, 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 person or domestic partner is presumed to be community property, unless otherwise noted.  Since the property is owned equally, all parties must sign to transfer title or secure financing.
2. Community Property with Right of Survivorship– property owned together by husband and wife or domestic partners. It shares the characteristics of community property but adds the benefit of right or survivorship similar to title held in joint tenancy.  There may be tax benefits in owning this way. Upon death, the decedent’s interest ends and the survivor owns the property.
3. Joint Tenancy—a form of ownership by two or more persons, who may or not be married or domestic partners, in equal interest, subject to right of survivorship in the surviving joint tenants. Title must have been acquired at the same time, and the document must expressly declare the intention to create joint tenancy estate. When a joint tenant dies, title to the property automatically conveyed to operation of law to the surviving joint tenant. Joint tenancy property is not subject to disposition by will.
4. Tenancy in Common—a form of vesting title to property owned by two or more individuals in undivided fractional interests. Fractional interests may be unequal in quantity or duration or may arise at different times. Each tenant in common owns a share of the property, is entitled to a comparable portion of the income and must bear the equivalent share of the expenses. Each owner may sell, lease, or will to his/her heir that share of the property.

Other Ways to Hold Title:

1. Corporation—this is legal entity, created under state law, consisting of one or more shareholders but regarded under law as having existence and personality separate from the shareholders.
2. A Partnership—two or more persons who can carry on business for profit as co-owners, as governed by the Uniform Partnership Act. The partnership may hold title to real property in name of the partnership.
3. Trustees of a Trust—a 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. I RECOMMEND EVERY ONE OF MY CLIENTS LOOK INTO THIS TYPE OF OWNERSHIP, IN ORDER TO AVOID PROBATE IN THE EVENT OF DEATH.
4. Limited Liability Companies (LLC’s)—this is a legal entity and is similar to the corporation and the partnership. The operating agreement will determine how the LLC functions and is taxed.  Like the corporation, it’s existence is separate from it’s owners.

How you own your property has legal and tax consequences, so ALWAYS seek legal advice before deciding which direction to go…