Title Vesting
Knowing How to Take Title
Title Vesting
Knowing How to Take TitleWhen purchasing property, the manner in which title is vested is an important decision which sets a plan for what happens to each owner's interest in the property when they pass.
When more than one buyer is involved in purchasing property, how they take title is an important discussion to have. When two or more buyers take title together, it is a co-tenancy; however, there are different main options for co-tenancies and whichever option is chosen determines the future of each owner's share of the property.
The most common ways to take title are:
Joint Tenancy with Rights of Survivorship
When more than one person is purchasing property, Joint Tenancy with Rights of Survivorship is an option that requires each person own an equal portion of the property, while still having rights to possess the entire property. This is often how couples who are not married buy a house together. Right of survivorship means that if one of the owners dies, the other owner assumes full ownership of the property without the property having to pass through probate.
Keep in mind that when holding title as Joint Tenants with Rights of Survivorship, one of the joint tenants can break the survivorship element by conveying their interest to a third party. The conveyance of one person's interest creates a tenancy in common with the third party.
Tenancy in Common
Under Tenancy in Common, multiple people can vest in title and own whatever percentage of interest they decide. Each party holds undivided interest in the whole property; therefore, each party has the right to use and occupy the entire property and can transfer their ownership interest to a third party. This method of holding title is common for two or more people who purchase a house together.
In contrast to Rights of Survivorship, if buyers take title as Tenants in Common, when one owner dies, the ownership rights are not passed to or disbursed amongst the other owners. When an owner passes, their ownership rights are distributed to their devisees in their Will, or pursuant to State intestacy law.
For example, if a couple gets married, but each spouse already has children from a prior marriage, taking title as tenants in common allows each spouse to pass their ownership of the property to their children from the first marriage after they die. The surviving spouse will not take full ownership of the property, unless otherwise designated in their partner's will.
Tenants by Entirety
When a married couple buys property together, they are automatically taking title as Joint Tenants with Rights of Survivorship; however, it is called "Tenants by the Entirety". It simply means when one spouse dies, their ownership rights transfer directly to the surviving spouse. This is the case whether or not the deed states that they are married. Each spouse has full ownership of the property. When holding title this way, one spouse cannot sell their share of the property without consent from the other spouse. If a married couple does not want their ownership rights to pass directly to their spouse upon one of their deaths, the deed must specify the couple is taking title as Tenants in Common.
Therefore, when purchasing property, it is important to consider how you take title, as it ensures you get to choose who will receive your ownership share of the property, not the state probate court.