This is the most straightforward method of owning real estate. You own the property, and the deed is in your name. If you have a mortgage on the property, you technically do not own the property free and clear. Once you pay off the mortgage, the property is all yours.
Joint Tenancy or Tenants in Common
These two methods of real estate ownership involve two or more co-owners. Joint tenants with right of survivorship own the property together during their lifetimes. When one owner dies, the other takes sole ownership of the property. Tenants in common own the property together, but when one owner dies, his share passes to his heirs. The other owners’ shares stay the same. Problems may arise, though, if multiple heirs take over a deceased owner’s share.
Husbands and wives in California share as community property any items purchased during the marriage. This includes real estate – even if only one spouse’s name is on the deed or mortgage. When one spouse passes away, the other will receive all community property of the marriage (usually regardless of the will or other estate planning documents).
When one spouse is not a citizen, community property can make estate planning complicated. The non-citizen spouse may end up paying expensive estate tax on some property. Estate planning structures such as QDOTs can help minimize tax burdens.
Real estate can be placed in trust, just like any other property. The trustee takes title to the property in care for the trust. Many people find placing real estate in trust to be an attractive option because – if the trust is irrevocable – doing so removes the property from their taxable estates. As a result, their estates may not need to be probated, saving thousands in costs.
Real Estate Holding Company
Other people prefer real estate holding companies to trusts. You can use an LLC, corporation, or other business structure to own property instead of owning it directly. Again, this can reduce the need for probate and potentially save on taxes.
If you are not sure how you own your real estate or want to change ownership methods, talk to an estate planning lawyer in your area.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.