HOLDING TITLE TO YOUR HOME

If you’re thinking of purchasing a home, have you considered how you intend to hold title to the property? Surprisingly, many home purchasers don’t give much attention to the question even though the manner in which title is held can have far-reaching ramifications.

The best way to come to a decision about title is to consult with a real estate attorney. Before you do that, however, you may want a little background on the more prevalent title-holding methods:

• Title held in the name of one individual. Single individuals would probably be the most likely candidates for this method of holding title. However, married individuals may also, for one reason or another, choose to take title individually rather than with their spouse. When the owner of the property dies, probate is necessary (unless the owner had a revocable trust and the home was included as part of the trust’s assets).  The property takes on a new value for the beneficiary—equal to its fair market value at the date of the original owner’s death.
• Joint tenancy with right of survivorship. Under this form of ownership, all (two or more) owners hold title to the property. Each owns an equal share of the property and when one owner dies, the others become owners of the decedent’s portion. An advantage of joint tenancy is that it cuts probate costs since the decedent’s portion of the property normally reverts to the remaining joint tenants automatically (ownership recording, of course, needs to be changed). The basis of the decedent’s part is revalued at date of death.
• Community property. Married couples in community property states of Arizona, California, Idaho, Nevada, New Mexico, Louisiana, Texas, Washington, and Wisconsin can claim community title to property. Under community property rules, each spouse owns half of the property and each spouse can pass his/her portion either to the other spouse or to someone else. An advantage of community property is that when it is willed to a surviving spouse, the entire property gets revalued to fair market value at the date of the decedent spouse’s death.
• Community property with right of survivorship. Since July 1, 2001, married couples in California have been able to hold title to property as “community property with right of survivorship.”  This method combines the tax benefits of holding title as community property, including a double step-up in basis, with the ease of property transfer available to the survivor of joint tenancy property, which requires the surviving spouse to inherit the property and allow title to change without court action.

Others methods of holding title, like tenancy in common or holding property in trust, are also available. All have their “special” pros and cons. Before making final decisions about the method of taking title that’s best for you, take some extra time to check them out.