Title Vesting / Holding Title

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Title Vesting Options

Before you reach the closing day, you will want to make a decision as to how you will "hold title" to the property. Since this decision has legal, tax and estate planning ramifications, it may be prudent to consult an attorney or CPA.

The following information is supplied for informational purposes and should not be relied upon as legal definitions.

Vesting Alone

Severalty
Sole ownership of the property by one person or entity.
- A single individual who has not been legally married.
- An unmarried individual who was married and is now legally divorced.
- A married individual who wishes to acquire title in his/her name alone. At closing, the spouse of the buyer will be required to quit claim (i.e. relinquish) his/her right, title and interest to the property.

Living Trust
A living trust is created while an individual is alive and gives the individual control of the distribution of his/her estate. The individual transfers ownership of his/her property and assets into the trust.

Vesting with Others

Community Property
Property owned equally between a husband and wife. Each must sign all agreements and documents of transfer.
- Who can take title? Only a husband and wife.
- Ownership Division: Interests are equal.
- Who holds title? Similar to title being in a partnership, title is held in "community."
- Possession: Equal right of possession.

Joint Tenancy
Ownership by two or more individuals, each with an equal interest in the property. Can only be used by individuals, and not companies, trustees, or other entities. When one dies, his or her interest passes automatically, without probate, to the other owner(s). Any one of the owners may sever the joint tenancy by conveying his or her interest.
- Who can take title? Any number of individuals.
- Ownership Division: Interests cannot be divided.
- Who holds title? There is only one title to the whole property.
- Possession: Equal right of possession.

Tenancy by the Entirety
A type of joint tenancy ownership available to husband and wife or registered reciprocal beneficiaries. Generally, property held in this tenancy is protected against claims under state law by creditors of one of the owners (please consult attorney for details). When one owner dies, his or her interest passes automatically, without probate, to the surviving spouse or reciprocal beneficiary. Until death, divorce, or termination of the reciprocal beneficiary status, both owners' signatures are required for any deeds, mortgages, or other conveyance of the property.
- Who can take title? Any number of individuals.
- Ownership Division: Any number of interests, equal or unequal.
- Who holds title? A separate legal title to his undivided interest is held by each co-owner.
- Possession: Equal right of possession.

Tenancy in Common
Ownership of the property by two or more persons or entities, each with equal or different percentage interests. Generally, each owner has equal rights to possess and use the property and may separately convey (freehold or leasehold) and deal with the owner's respective interest. When one dies, that owner's interest in the property passes to that owner's heirs, not to the other owners.
- Who can take title? Any number of individuals.
- Ownership Division: Any number of interests, equal or unequal.
- Who holds title? A separate legal title to his undivided interest is held by each co-owner.
- Possession: Equal right of possession.

Entity Types

Corporation
A corporation is a legal entity, created under state law, consisting of one or more shareholders but regarded under law as having essentially the same as those of an individual. The entity has continuous existence until it is dissolved according to legal procedures. Land owned by a corporation cannot be attached for personal debts or judgments rendered against any of its shareholders. See also LLC below (i.e. "Alter Ego Liability").

Limited Liability Company (LLC)
An artificial entity created under and governed by the laws of the jurisdiction in which it was formed. LLC members are offered the same limited liability protection as a corporation's shareholders. Limited liability companies are generally able to provide the pass-through taxation of partnerships or S corporations.

In most states today, LLCs are allowed to have a perpetual existence. In most cases, unless otherwise provided in the articles of organization or a written operating agreement, an LLC is dissolved at the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interests vote to continue the LLC). Ordinarily, only the LLC is responsible for the company's debts, thus shielding the members from individual liability. However, there are some exceptions where individual members may be held liable:
- Guarantor Liability: Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease.
- Alter Ego Liability: Very similar to the judicial doctrine applied to corporations where a court may hold the individual shareholders liable where the business entity is merely the "Alter Ego" of its shareholders, a member of an LLC may also be held liable for the LLC's debts if the court imposes its "alter ego liability" doctrine.

Partnership
A partnership is an association of two or more persons who can carry on business for profit. A partnership may hold title to real property in the name of the partnership with partners having an equal or an unequal interest in the property.

Trust
A trust is an arrangement whereby legal title to property is transferred by the grantor (or trustor) to a person called a trustee, to be held and managed by that person for the benefit of the people specified in the trust agreement, called beneficiaries.