The Deed – Taking Title Correctly Can Prevent Any Future Headaches



There are a number of ways a buyer can choose to hold title. The method which suits their particular situation is normally determined by either an attorney or closer who is handling the transaction, or if it is a cash deal, the seller may prepare the deed for recording in the public records.

co-ownership

Real estate title deeds. © Marzky Ragsac Jr. - Fotolia.com

Buyers should be aware of the different ways that they can take ownership of the property they are purchasing. “Vesting” of title simply means how title is held, for example, individually or together with another individual or entity. The way that title is taken can have an impact on the buyer’s use and enjoyment as well as that of any heirs who may stand to inherit the property; it can also affect the taxes that may be assessed against the deceased’s estate.

Sole Ownership

Sole ownership, means, obviously that you own the property by yourself. The way you take title as an individual can differ, depending upon your particular situation. For example, if you are a divorced individual and your ex wife is selling her interest to you, the title on your deed could state something like “James Smith, an unmarried man”. If you are buying property as a married person and your spouse will not be on the title, the deed language will read something like “James Smith, a married man, as his sole and separate property.”

Co-Ownership

The most common kind of co-ownership is a husband and wife taking title together. With this kind of ownership, each spouse has an equal interest (unless otherwise specified) in the home. When one individual dies, the other obtains their deceased partner’s interest without the necessity of putting the property into a probate action.

In many states, real property which is the “homestead” or main residence of an individual is protected from creditors (excluding state and federal tax collectors of course) and in community property states such as Florida or Wisconsin, spouses (whether they are named on the deed or not) have an ownership share in property which is their homestead.

Community Property with Right of Survivorship

Of course, it is not required that individuals be married to own property jointly. Two individuals can take title jointly together, and depending upon the manner in which they take title, ownership can pass from one to the other after death (just as in a husband and wife scenario) or, each individual’s ownership can pass to whomever they choose – heirs or their crazy Uncle Frank.

For example, if a man and his best friend take title to a hunting lodge they visit every year, and they each want their families to receive their share, the vesting language on the deed could read something like, “Jim Stewart, a married man, as his sole and separate property and James Dean, a single man.” What would happen in this scenario is if Jim died, his share would either go to whomever was named in his will, or if he died intestate, the state statutes of the property’s location would determine the heirs and their interests, however James Dean would still retain his half interest. This kind of ownership is termed a “tenancy in common”.

If James Dean passed, the same rules would be applied. If, however, they took title as “Jim Stewart, a married man, as his sole and separate property and James Dean, a single man, as joint tenants with full rights of survivorship, when one title holder passed, the other would receive the co-owner’s share. This kind of ownership is known as a “joint tenancy”, and the ownership percentages can be split in any number of ways.

These are just a few of the most common ways title can be held. Individuals can also hold title in a trust (which can often provide a great tax shelter) as well. For the prevention of any future headaches and to ensure that your possession is not hindered by any glitches, it’s advisable to obtain title insurance and/or obtain the council of a real estate professional who is familiar with vesting title.