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Title To Real Estate

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When a client purchases real estate, I am often asked what is the best way for him or her to take title. As I find myself often saying to clients, "it depends". Below are some issues you should consider when taking title to a property you are purchasing. Of course, you should discuss the options with your attorney and determine what is best for you.

 

1. In Your Own Name. This is certainly an option. So, for example, title may be vested in the name of John Smith or Jane Doe, assuming you are John or Jane. If you are not John or Jane, you can still take title in most states in the name of John Smith or Jane Doe but you may need to file a fictitious name registration stating your real name and the name you want to use. Many lenders require you to take title in your own name. However, as more fully stated below, this may not be your best alternative.

2. Purchasing with someone else. If your purchase a property with your partner or a relative, he or she may wish to be on the title with you. Assuming that, several variations, all with different legal consequences exist:

a) Tenancy in Common - This is where John Smith and Jane Doe take title together but state that if one deceases, then their interest goes to their heirs and not to the other. In other words, there is no right of survivorship interest to Jane is John passes. So, if John predeceases Jane, then his interest in the property goes to according to his will and not necessarily to Jane. If John does not have a will then it will go to his heirs. If Jane is not one of his heirs then Jane might have some concerns. Also, As discussed below, this concern can usually be taken care of with proper planning by your attorney.

b) Joint Tenancy - Again, this is where John and Jane buy the property together but instead of it going to the deceased's heirs or through his will, it goes to the other person automatically upon death of the first owner. So, again, if John passes before Jane, it passes immediately to Jane upon John's death and does not go through any will he has executed. Many of my LGBT clients often prefer this way of titling property purchased by them together. This way, they are protecting each other in the event of death. Again, an attorney should help you with this to make sure both of your wishes are followed. One major caveat here, John's interest in his property are subject to the claims of his creditors. So if John has a $100,000 judgment against him, his creditors can execute on it any time before his death and, possibly even cause the property to be sold to satisfy the judgment.

c) Tenancy by the Entirety - In a small minority of states, where John and Jane are married (or two men are married), then the property can be titled as Tenants by the Entirety. This is a special kind of Joint Tenancy for married couples. If John and Jane are husband and wife, and their property is held in Tenancy by the Entirety, then upon John's passing, it goes to Jane as in Joint Tenancy. However, the property is not subject to the claims of John's creditors unless Jane predeceases John. In other words, presume John has a $100,000 judgment against him. If John passes before Jane, the property goes to Jane and the judgment is extinguished. If Jane predeceases John, then the judgment is not extinguished and John's creditor can go after the property.

3. Trust. Most often, the property will be held in a revocable trust. The Trust document will state to him the property goes to (or at least John's portion). This method of titling has nothing to do with creditors or inheritance tax or otherwise but is simply an Estate Planning device.

4. Corporation Partnership or LLC - Many times, property is held in the name of a corporation or LLC. This is invariably for business reasons. To be sure, many businesses own the property where their offices are located. Indeed, lenders who supply loans or capital may want the real estate titled certain ways. Consultation with your attorney will determine what is best for you and your business. Significant income tax consequences result by whichever method you use to take title so it is strongly recommended that you discuss this with not only your attorney but your accountant as well.

In summation, there is no "one size fits all" on how to title real estate. Business and personal considerations come into play when making those decisions. What is set forth above are some general guidelines to consider when making those decisions. Good luck.

 

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Last modified on Friday, 28 September 2018 20:59

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