Real estate title matters! When purchasing property, the type of title you choose defines who has the legal rights of ownership, so don’t treat title as an afterthought. It’s important to understand the different types of title available, particularly when you purchase as a married couple, unmarried couple, or with family, business associates, or friends. The state you live in can also affect which types of title are available to you. How your property is titled becomes critical when one owner dies, since title may override any type of provision you made in a will. Below are four common types of title.

Sole Ownership

If one person owns property with the title of sole ownership, he or she has complete interest and rights to the property. Ownership can be conveyed to another person through transfer documents, or by the laws of intestate succession (procedures that occur in the absence of a will). If the owner passes away, his or her interest in the property is included in the estate.

Joint Tenancy

When two or more people share equal, undivided interests in a property, the title is joint tenancy. Anyone can share interest in property, not just spouses, although there is a tax benefit if a married couple has joint tenancy: The value of the deceased spouse’s property passes to the surviving spouse with no probate and no tax consequences. This is similar to the process of joint tenancy with rights of survivorship (JTWROS).

A joint property interest cannot be passed through traditional documents, such as a trust or a will. If one owner dies, the ownership interest passes directly to the surviving owner. However, if the joint owners are not married, the entire value of the property is included in the deceased’s estate, meaning that the property must go through the probate process. Usually joint tenancy with rights of survivorship is better for owners who aren’t married.

Joint Tenancy with Rights of Survivorship (JTWROS)

In this type of ownership, joint tenants also have undivided rights to the property. When a joint tenant dies, his interest passes to the remaining joint owners. While he is alive, he can also transfer his interest to another person.

To exemplify this type of title, let’s say a mother leaves her home to three grown children who have JTWROS. When one sibling dies, the home is now equally owned by the remaining siblings with no involvement of any of the deceased’s heirs. The ownership interest passes to the siblings without probate.

Tenancy in Common

Tenants in common own interest in property, but in this type of title, interest can be divided into different percentages. One tenant can pass his interest to others with traditional documents. However, if three people own a property as tenants in common and one person dies, that person’s ownership does not automatically go to the other owners. Unlike JTWROS, the deceased’s interests go through probate. This can cause issues if other owners want to sell the property since they’ll need to wait until the probate process is complete.

Real Estate Term of the Week

Title: In real estate, title determines who has legal ownership and the right to use a piece of property. Defective titles can result in problems establishing ownership, which can complicate resale or impact the exercise of rights over property.

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