Whether you’re single, coupled up or married, deciding how to hold title is one of the most important decisions home buyers make. The ramifications of that decision might not be apparent for years.
One of our recent columns discussed the various ways homeowners hold title to their property and considered the question of whether a spouse should change the way the home is titled after his or her partner dies.
Not surprisingly, several readers had a few thoughts and suggestions for home buyers considering title questions. Here are two:
One real estate attorney wrote in to say that, in his view, there are three ways to title property between spouses. “The 'joint tenant' approach is the least common and usually must include the language 'with right of survivorship and not as tenants in common.' Spouses typically acquire title as “tenants by the entireties,” which only applies to spouses.
“Sometimes you will see a couple who acquired the property before marriage. In some states, a premarital joint tenancy automatically becomes tenants by the entireties upon marriage. The drawback to joint tenancy is that it is possible for one person’s interest to be alienated by deed or by suffering a judgment lien, bankruptcy or similar,” he said.
Our correspondent said some states allow joint tenancy to be partitioned, meaning that the ownership can be separated. The purpose of getting title cleared in one spouse’s name after the other’s death is just that.
“While records are fresh, a check of the dates of valid marriage” syncing with a clear title “can produce an easily marketable property with no surprises,” he said. “The best advice for a widow or widower is to have the title reviewed by an attorney. Of course, when the couple engages in any estate planning, a competent lawyer will review such documents.
We wrote that a surviving spouse need not do anything upon the death of a spouse depending on how they held title to their home. This attorney thought we should have directed the homeowner to an attorney, who might have suggested making changes to the title of the property. That’s good advice, and may even be a better way to get things done, but it has higher costs associated with it, including transfer taxes and attorney, filing and recording fees.
A second reader thought that we should have gone into more detail on the intricacies of the different ways people should hold title to their homes.
"You discussed ‘joint tenancy with rights of survivorship’ and ‘the other way couples own property’ (tenants in common), indicating there are only two ways for couples to jointly own property. You neglected the most desirable ‘tenants by the entirety,’ which covers survivorship and protects both parties from the value of the property being sued for debts of the other, as I understand it,” this correspondent wrote.
True, there are many ways married couples or those in a civil union can hold title to a home. As noted by the prior correspondent, joint tenancy with rights of survivorship gives each owner the ability to own the entirety of the home upon the death of the co-owner. This transfer is automatic and does not require owners to do anything.
A second form of ownership for married couples or those in a civil union takes the form of tenancy by the entireties. This form of ownership gives the couple the same survivorship rights as a joint tenancy deed but it also affords the couple certain protections against some creditors. Without going too deep, we can generally say tenancy by the entireties provides that debts entered into by one of the spouses shouldn’t cause the loss of the home. So if one spouse incurs gambling debts, the creditor can’t force the sale of the home. There are conditions to keeping the tenancy by the entireties valid, including that the home must be your principal residence and you must remain married.
A third form of ownership is to hold title as tenants in common, where each owner has a specific percentage ownership interest in the home. Upon the death of one co-owner, that person's share goes to the person named in the will or as set forth by the laws in the state in which the property is located.
You can also own a home using various estate planning trusts, such as revocable trusts or living trusts of one of the spouses or part ownership of the home among two trusts, and then there are variations of these forms of ownership.
Thanks for your questions and comments.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the chief executive of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through Glink’s website, ThinkGlink.com.