Why Title Matters

Understanding how your real estate is owned, or “titled,” is necessary because this determines the extent of control you have over your real estate, how susceptible your property is to creditors, and what will happen to it upon your death.

Individually

One of the most common ways people own real estate is individually. As the sole owner, you have full control over the real estate. You can transfer it to anyone and can mortgage it. Additionally, at your death, the real estate will be transferred to the individual(s) named in your will (or trust) or according to state law, both of which will require probate court involvement to transfer ownership to your heirs.

Tenants in Common

When several people own real estate as tenants in common, the entire property is owned by the group, meaning that no one person can claim ownership of a specific portion of it. Yet the ownership does not have to be equal. One person can own a 25% interest (i.e. “share”) while the other has a 75% ownership interest. Each co-owner is free to transfer or mortgage their interest as they wish.

Joint Tenancy

For this type of ownership, also known as “joint tenancy with right of survivorship,” two or more individuals own an equal and undivided interest (share) in the real estate. When one of the owners dies, their interest automatically passes to the remaining co-owners, and the survivor(s) continue to own the real estate. As mentioned before, a benefit of this type of ownership is that ownership is transferred automatically at death, avoiding probate.

In a Trust

Another option for real estate ownership is to transfer it to or have it purchased by a trust. As the trustmaker, you can establish rules for the use of the real estate, appoint a person (sometimes yourself) to oversee the maintenance of the real estate while allowing others (sometimes yourself) to enjoy it. One of the primary benefits of transferring ownership of your real estate to a trust is that at your death, the real estate does not have to go through the probate process. This is because the trust, not you, is the owner, and the trust can never die.

By a Limited Liability Company

Another entity that can own real estate is a limited liability company (LLC). Instead of owning the real estate, you own a part of the LLC (known as a membership interest), and that is what will need to be transferred upon your death according to the terms of an operating agreement or estate planning documents, or based on state law if there is no will or trus One of the major benefits of using an LLC is that it provides limited liability. If a lawsuit is filed based on a claim arising from the real estate, or if a creditor seeks to satisfy a claim, the only assets available to satisfy any judgments or creditors are those owned by the LLC.

We can help! The title of your real estate can play a large role in how your estate plan is set up, and if your real estate is not titled properly, it can completely undo your intent for your estate planning. Give us a call today so we can review your deeds and create an estate plan that will protect your property for future generations.

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