When you bought your home, did you give much — or any — thought about how you’d title it?
“Many homeowners don’t think about it,” says Matthew Drewes, an attorney at Thomsen & Nybeck in Bloomington, Minn. “Some don’t even realize there are options until they show up at closing and are asked how they’d like their deed to read. At that point, they’re pretty much on their own. Title companies are reluctant to give advice, and frequently you’re dealing with a closer who’s not well-versed in title issues.”
How you title your home shouldn’t be an afterthought. “It’s important so that your interest in your property goes where you want it to go at your death,” says Nancy Polomis, chair of the real estate development department at Hellmuth & Johnson PLLC in Eden Prairie, Minn.
Here’s a primer on common ways to hold title to your home, along with tips for figuring out which is best for you.
Title basics you should know
There are several common ways to hold title to your home. You can hold it solely in your name, in joint tenancy or as tenants in common.
Sole ownership is just what it sounds like: You hold the title in your name alone, even if you own the property with other people. The second option — formally called joint tenancy with the right of survivorship — is a way to hold title in more than one person’s name.
“Joint tenancy means that you and I own the property together, and if one of us dies, the other gets it without the property passing through probate,” says Polomis. “The survivor files an affidavit saying the other titleholder is dead, attaches the death certificate and gets the property.”
Tenancy in common is another method for holding title in several names. “With tenancy in common, you and I own the property together,” says Polomis. “But upon my death, my interest is distributed according to my will or if I don’t have a will, according to state law.”
Some states have variations on joint tenancy. “In Florida, when you take title as husband and wife, it’s deemed a tenancy by the entirety,” says Roberto Blanch, an attorney at Siegfried, Rivera, Lerner, De La Torre & Sobel PA in Coral Gables, Fla. Tenancy by the entirety is joint tenancy with twists. You can end a joint tenancy simply by conveying your interest in the property to another person. With tenancy by the entirety, however, you can’t transfer your interest unless you and your spouse participate in the transfer.
The best way to title your home
Carefully evaluate which form of title is right for your situation. “Ask yourself: Who do I want to end up with my interest in this property?” says Polomis. “Do I want it to be the person with whom I own it or someone else?”
If you’re married and want your interest to pass to your spouse upon your death, joint tenancy is probably the best solution. But there are drawbacks. “Maybe you or your husband have credit issues,” says Polomis. “You might not want the person with debts to be on the title at all.”
That may also be true if one spouse has a high-liability occupation. “If one of you is a doctor or lawyer with the risk of malpractice claims, you may want the spouse not at risk to own the property,” says Drewes. “Then the target of potential lawsuits has no legal interest that can be pursued by creditors.”
Joint tenancy may also be unwise if you have a complicated family history. Perhaps you’re married, but not for the first time, and you have children from a previous marriage. “You may want to title your home as tenants in common so that when you pass, your interest goes to the beneficiaries of your estate,” says Blanch. That reasoning may also be sound if you’re divorced with children, but own a home with a new partner.
Think very carefully about adding someone other than your spouse as a joint tenant. Parents sometimes add an adult child thinking the property transfer upon their death will be simpler. Before you do that, speak to a tax adviser because your children may lose important tax benefits.
The tactic carries other risks, too. “What you may not be considering is that if your son Johnnie is a joint tenant, Johnnie’s creditors can come after your property,” says Polomis. “And if Johnnie and his siblings don’t get along, he can file the affidavit of survivorship and stick his tongue out at everyone after your death. He goes on his merry way with the property solely in his name even though everybody knows that’s not what you intended.”
How to change your title
Changing how you’ve titled your property is relatively simple and inexpensive, but it’s not for the uninformed. “In Minnesota, you can get free forms, and recording a new deed is just $46,” says Drewes. “But it’s risky to attempt the transfer of title without the advice of a lawyer or other professional. You may need to use particular words in your deed, and there may be tax implications. Get advice because there can be so many unexpected results.”