The way in which homebuyers hold title to a property can have significant legal and tax implications, including whether the property must go through probate upon death and what taxes the heirs must pay when they sell it.
Among the most recommended ways to hold title to homes and other real property is in a revocable living trust. Among its many advantages are the avoidance of probate costs and associated delays - and apart from the cost of creating a living trust, and deeding real property into it, there are few, if any, disadvantages.
Until the death or disability of the trust creator, the home and/or other real estate - as well as any stocks, bonds, bank accounts, automobiles and other assets also held in it - may be bought, sold and financed as usual.
If the trustor becomes incompetent, the named alternate trustor—typically the spouse or adult child—takes over management of the trust assets. When the trustor dies, the assets are distributed according to the trust's terms.
Privacy is another advantage. Unlike a will, which becomes part of the public probate file, the living trust terms remain private, In addition, court challenges to a living trust, unlike challenges to a will, are almost never successful.
But there are other customary options for holding title:
- Sole ownership - Title is held in one name only, even if the property is owned with other people.
- Tenancy in common - Two people hold title but upon the death of one, the interest is distributed according to a will – or if there is no will, according to state law.
- Joint tenancy - Two people hold title together, and if one dies, the other gets it without the property passing through probate. The survivor simply files an affidavit, along with a death certificate, stating the other titleholder has died. (Some states have variations on join tenancy, so it is wise to check with an attorney.)
Should your clients ask your advice on how to hold title, you should advise them to determine
who they want to end up with their interest in the property, and then consult with an attorney if they have specific questions about their personal or family situation.
Ba
rbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. Published with permission from RISMedia.