| Real property has become increasingly more valuable, and the question of how a person should hold ownership in his or her property has gained greater importance. The form of ownership, also called the vesting of title, determines future rights, as well as who may sign various documents involving the property. How the title is vested can affect such matters as income taxes, inheritance and gift taxes, transferability of title, exposure to creditors' claims, and more. The vesting of title also can have significant implications for what happens to the property upon an owner's death.
Title experts advise those purchasing real property to give careful consideration to the manner in which they will take title. Buyers, and even current homeowners, should consult an attorney to determine the most advantageous form of ownership for their particular situation, especially in cases of multiple owners of a single property.
Some general information about common forms of vesting is provided as an overview. Consumers should not rely on this as legally authoritative, and should seek professional legal counsel if they are unfamiliar with the most suitable ownership choice for their particular situation. Real property purchasers should carefully consider—before the closing of their transaction—how they should hold title to their property.
COMMON FORMS OF TITLE VESTING
SOLE OWNERSHIP
Sole ownership is ownership by one person or one entity capable of acquiring title. The distinction here is in the legal number of owners. It can be one natural person, or one corporation, or one city, county or state.
Sole ownership is often referred to as ownership in severalty, which derives originally from a Latin word meaning "to separate." It also can be referred to as tenancy in severalty or as an estate in severalty.
Examples of common vestings in cases of ownership in severalty are:
1. A Single Man/Single Woman:
A man or woman who has not been legally married. For example, the vesting clause on a deed might read: "Bruce Buyer, a single man."
2. An Unmarried Man/Unmarried Woman:
A man or woman who was previously married and is now legally divorced. For example: "Sally Sales, an unmarried woman."
3. A Married Man/Married Woman as His/Her Sole and Separate Property:
A married man or woman who wishes to acquire title in his or her name alone. For example: "Bruce Buyer, a married man, as his sole and separate property."
When a married person wishes to take title alone in states that are community property states, the title company insuring title will require the spouse of this person to specifically disclaim or relinquish his or her right, title and interest to the property. This establishes that it is the desire of both spouses that title to the property be granted to one spouse as that spouse's sole and separate property.
CO-OWNERSHIP
Title to property owned by two or more persons or entities may be vested in the following forms:
1. Tenancy in Common:
The most common form of co-ownership, this is a form of vesting title to property owned by any combination of two or more persons or entities in undivided fractional interests. These fractional interests may be equal or unequal in quantity or duration and may arise at different times. For example: "Bruce Buyer, a single man, as to an undivided 3/4 interest and Penny Purchaser, a single woman, as to an undivided 1/4 interest, as tenants in common."
Each tenant in common owns a share of the property, is entitled to a comparable portion of the income from the property and must bear an equivalent share of expenses. Each co-tenant may sell, lease or will to his heirs that share of the property belonging to him.
2. Tenancy by The Entirety:
Oregon law provides that a husband and wife automatically become tenants by the entirety when they take title to real property in both their names. They could instead specify another form of vesting, but if they do not, they are assumed to be tenants by the entirety. For example: "John and Sally Sales, as tenants by the entirety."
With this form of vesting, the law provides that the owners must be legally married. Neither a statement on a deed expressing the owners wishes to be tenants by the entirety, nor a common-law marriage, is sufficient to create a tenancy by the entirety.
In tenancy by the entirety, both spouses have 100 percent ownership of the property with the full right of survivorship. At the death of one spouse, the other automatically becomes the owner in severalty of the entire property without the need for probate. A person named in a will to inherit a property subject to a tenancy by the entirety would be unable to inherit if the spouse naming him or her died first. Because of the right of survivorship, the deceased spouse's interest dies when the spouse dies, terminating any interest that may have been previously sold, leased, mortgaged or willed to someone else by the deceased spouse.
3. Community Property:
Not recognized in Oregon, this is a form of vesting title to property in so-called "community property states" like California and Washington. In those states, community property is property owned by a husband and wife together during their marriage. Community property is distinguished from separate property, which is property acquired before marriage, by separate gift or bequest, after legal separation, or by agreement between the spouses. For example: "Bruce Buyer and Barbara Buyer, husband and wife, as community property."
In community property states, real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Since all such property is owned equally, husband and wife must sign all agreements and documents of transfer. Under community property, either spouse has the right to dispose of one-half of the community property, including transfers by will.
4. Joint Tenancy:
Also not legally recognized in Oregon, joint tenancy is a form of vesting title to property owned by two or more persons—who may or may not be married—in equal interest, subject to a right of survivorship by the surviving joint tenant. For example: "Bruce Buyer and Barbara Buyer, husband and wife, as joint tenants."
Title must have been acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate. When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant. Therefore, joint tenancy property is not subject to disposition by will.
OTHER WAYS OF VESTING TITLE INCLUDE AS:
1. A Corporation*:
A corporation is a legal entity, created under state law, consisting of one or more shareholders but regarded under law as having an existence and personality separate from such shareholders.
2. A Partnership*:
A partnership is an association of two or more persons who can carry on business for profit as co-owners, as governed by the Uniform Partnership Act. A partnership may hold title to real property in the name of the partnership.
3. Trustee of A Trust*:
A trust is an arrangement whereby legal title to property is transferred by the grantor 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 the beneficiaries.
4. Limited Liability Companies (LLC)
These are legal entities similar to both the corporation and the partnership. Each LLC must have an operating agreement that determines how the LLC functions and is taxed. Like the corporation, the LLC's existence is separate from its owners.
Remember, how title is vested may have important legal consequences. Real estate owners should consult an attorney to determine the most advantageous form of ownership for their particular situation.
* Documentation such as trust agreements or certificates, corporate articles and bylaws, partnership agreements, or an LLC operating agreement may be required to be presented when signing legal documents related to ownership of real estate by a corporation, partnership, LLC or trust. |
