If you are buying real estate, or doing estate planning as a property owner, one question that is likely to come up concerns how you want to hold title to your property. Depending on the circumstances, there may be several choices.
If one person owns the property, he or she can own it individually. That is a simple form of ownership, but also is most readily subject to the claims of any creditors. Sometimes these risks can be mitigated by appropriate insurance and other planning.
If there are multiple owners, the property can be owned as tenants in common, or in joint tenancy with right of survivorship. A tenancy in common gives the parties a set portion of ownership of the asset as a whole, which can be equal or different amounts. Those ownership interests potentially can be transferred or inherited. Alternatively, a joint tenancy with right of survivorship gives the parties mutual ownership while alive, and results in full ownership by the person who lives longest.
For married couples, tenancy by the entireties is an option. This is a special form of joint tenancy in which the marital unit essentially owns the property. In some circumstances, this form of ownership can shield or delay the exposure of the asset to a creditor with a claim against only one spouse.
Regardless of the number of interested persons, the property also can be held by an entity, such as a limited liability company, series limited liability company, trust, or land trust. The documents that govern such entities can set forth the nature of each person’s interest.
How to choose?
- When taking title, consider how the assets will be held, and what exposure they may have to any liabilities that could arise.
- Think about how the property fits with your other assets and estate plans.
- Consider what is required for financing. For example, lending terms may vary depending on how the property is held, and may be more stringent for investment properties and corporate entities.
If buying property, think about how you will be taking title as early in the process as possible. As an owner, consider whether a major life event makes a change sensible. If you are not sure which form is best, give us a call today!