Before you reach the closing day, you will want to make a decision as to how you will “hold title” to the property. This decision has legal, tax, and estate planning ramifications. Therefore, it may be prudent to consult an attorney or certified public accountant (CPA).

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

Buying Alone

• Sole Ownership
  • 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 or her name alone. At the time of closing, the spouse of the buyer will be required to specifically disclaim or relinquish his or 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 or her estate. The individual transfers ownership of his or her property and assets into the trust.

Buying with Others

• Tenancy in Common
  Enables each partner in the property to sell, lease or will to his/her heirs that share of the property belonging to him/her.
  • 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.

• Joint Tenancy
  Property owned by multiple individuals where if one of the owners dies, the remaining owners acquire the share of the deceased owner automatically.
  • 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.

• Community Property (Even when husband or wife is a “Non-Borrowing Spouse”)
  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.

Additional Ways to Hold Title

• 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.

• 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.

Many of us incorrectly call our home loan a mortgage, but in fact, a mortgage is not what your lender gives you to buy a home. A mortgage is actually the formal document proving the legal claim or lien on a piece of property that you give to the lender who holds it as security for the money you borrowed. The lien is recorded in public records. On a mortgage, you pledge the property as security for the repayment of your loan, but you do not transfer title to the lender.
If you (the mortgagee) repay your loan in accordance with the terms of the mortgage, it is canceled or satisfied by the lender (the mortgagor). However, if you do not repay your debt, the lender has the right to sell the secured property to recover funds through a court proceeding called foreclosure.

In some states, a deed of trust is used in place of a mortgage. While a mortgage involves two people (the borrower and the lender) a deed of trust involves three people – the borrower (or trustor), the lender (the beneficiary) and a trustee, a neutral third party, such as an attorney or a title agent. The deed of trust is also recorded in public records.

In a deed of trust transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the loan to the lender. The deed of trust is cancelled when the debt is paid. However, if you default on your payment of the loan, the trustee may sell the property at the request of the lender without a court proceeding.