Understanding Title

You've considered what it will be like to own your new home, but you probably haven't given a thought to how you'll own it. Understanding the different forms of title is the first step toward choosing the right one.

Sole Ownership
This is where a single owner holds full title to the property. The owner may sell, finance, or encumber the property at his or her discretion. The property passes to the owner's heirs through probate.

Tenancy in Common
In a tenancy in common arrangement, multiple parties each own a share in the property. The owners do not have to be related, and the ownerships interests need not be equal. Each owner accrues tax liabilities and benefits in accordance with the ownership percentage and may freely sell or transfer his or her interest without consent of the others. The interest of each owner passes to his or her heirs through probate.

Joint Tenancy
This is a common form of title for properties with 2 or more owners. Each owner holds an equal, undivided interest in the property. Upon the death of an owner the interest does not go into the decedent's estate, but rather passes to the remaining owner(s).

Tenancy by the Entirety
This is similar to joint tenancy, but is only allowed in certain states, and only for use by a husband and wife. Upon the death of either spouse the survivor automatically becomes the sole owner of the property. A property held in this way cannot be sold to satisfy creditors unless the claim is against both spouses (except in certain situations involving obligations to governmental bodies).

Owning Through Other Entities
Property can also be owned by a partnership, corporation, or trust. In this case, the individual(s) involved own an interest in the entity (or, in some cases with a trust, are a beneficiary) - which itself holds title to the property. There are a number of advantages and disadvantages to using each of these entities to hold property. These forms of ownership are primarily used by investors rather than homeowners.