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How Should You Title Your House?

Posted by Nina Whitehurst | Aug 30, 2019 | 0 Comments

I get calls a lot from people asking how they should title their house.  The answer is . . . you guessed it . . . it depends.

First, it depends a LOT on whether you are married or single.  

IF YOU ARE SINGLE

Being single simplifies things immensely because there are such fewer choices.  Here are the most common ones:

Title held in your name:  This how most single people initially hold title, in their individual names, e.g. Elroy Jetson, an unmarried man.  There are shortcomings to this method, however, not the least of which is it guarantees a probate in the event of your untimely demise.

Revocable Living Trust:  Many single people eventually graduate to a revocable living trust.  In that case, title would be held something like "Elroy Jetson, as Trustee of the Elroy Jetson Living Trust".  The beauty of this method is it avoids probate and also makes updating your trust-based estate plan from time to time easier than updating a will. 

Irrevocable Trust:  Later in life many single people, especially if they have children, think about moving to an irrevocable trust in order to preserve assets for the next generation.  In that case, title would be held something like "Elroy Jetson, as Trustee of the Elroy Jetson Family Trust".  Or you could name someone else as trustee, which is sometimes advisable.

Domestic Asset Protection Trust:  In a small minority of states (including, notably, Alaska and Tennessee), it is possible to create a trust with one's own assets, for one's own benefit, and also obtain asset protection.   This is usually not a suitable method for owing a primary residence, because it is not income-producing and often is encumbered, but in rare cases it might be an option.

IF YOU ARE MARRIED

The options for married people are many and also depend a great deal on state law.  This blog describes several different methods, some of which may or may not be available in your state.

IF YOU ARE MARRIED BUT OWN PROPERTY SEPARATELY

Sole and Separate Property:  If you acquire real property during the marriage using your sole and separate property, or you inherit the property, it should be titled in your name as your sole and separate property, e.g. ""Elroy Jetson, a married  man dealing with his sole and separate property".

Separate Revocable Living Trust:  Many married people eventually graduate to trust-based estate planning.  In that case you would contribute your sole and separate property to your separate trust.  Title would look something like ""Elroy Jetson, as Trustee of the Elroy Jetson Living Trust".

Separate Irrevocable trust:  Later in life many married people, especially if they have children, think about moving to an irrevocable trust in order to preserve assets for the next generation.  In that case, title would be held something like "Elroy Jetson, as Trustee of the Elroy Jetson Family Trust".  Or you could name someone else as trustee, which is sometimes advisable.

Transmutation: It is possible to take separately owned property and transmute it into jointly owned property, which opens up the possibilities listed below.  However, this should not be done without considering how this would impact property division in the event of divorce and also gift tax, estate tax, income tax and estate planning ramifications.

IF YOU ARE MARRIED AND ACQUIRE PROPERTY TOGETHER

Tenants in Common:  Married people can hold property as tenants in common just like unmarried people can.  If the deed does not specify the percentage interest, then the co-owners are presumed to own equal shares.  There are shortcomings to this method, however, not the least of which is it guarantees a probate in the event of the untimely demise of either co-owner. (Available everywhere.)

Tenancy by the Entirety (TBE):  Married people can hold property as tenancy by the entirety in some but not all states.  Upon the death of the first to die, the surviving spouse automatically becomes the full owner, with no probate required, and there is a step up in basis as to the decedent's half interest in the property.  This avoids probate at the first death but not at the second death.  Upon the second death, a probate would be required. An advantage of TBE is that it provides limited asset protection while both spouses are alive in that creditors of just one spouse cannot levy upon the home.  However, if the non-debtor spouse dies and the debtor spouse becomes the sole owner, the debtor spouse's creditor can get to the house. (Available in Tennessee.)

Joint Tenants With Right of Survivorship (JTWROS):  Married people can hold property as JTWROS just like unmarried people can. Upon the death of spouse, the surviving spouse automatically becomes the full owner, with no probate required, and there is a step up in basis as to the decedent's half interest in the property.  This avoids probate at the first death but not at the second death.  Upon the second death, a probate would be required. JTWROS provides no asset protection so if you like the survivorship feature and don't care about probate at the second death, TBE is a better choice. (Available nearly every state.)

Community Property:  In community property states, this is the presumption if the deed does not specify otherwise.  There are shortcomings to this method, however, not the least of which is it guarantees a probate in the event of the untimely demise of either co-owner.  At the first death it might be a simplified petition, but it is a probate nonetheless.  At the second death it would most likely be a full probate unless the value is very small.  An advance of community property ownership is a full step up in basis at the first death.  There is no asset protection. (Available in Arizona and California, but Tennessee residents can opt in using a trust.)

Community Property With Right of Survivorship (CPWROS):  Upon the death of spouse, the surviving spouse automatically becomes the full owner, with no probate required, and there is a full step up in basis.  However, there is no asset protection, and there will be a probate upon the second death. (Available in Arizona and California, but Tennessee residents can opt in using a trust.)

Joint Revocable Living Trust:  Many married people eventually graduate to trust-based estate planning.  In that case you would contribute your jointly held property to your joint trust.  Title would look something like ""Elroy and MindyJetson, as Trustees of the Jetson Family Living Trust"In some states, such as California and Tennessee, it is possible to preserve the character of property as community property (or opt in to community property) or TBE even after it is contributed to a trust.  (Available everywhere.)

Joint Irrevocable trust:  Later in life many married people, especially if they have children, think about moving to an irrevocable trust in order to preserve assets for the next generation.  In that case, title would be held something like "Elroy and Mindy Jetson, as Trustees of the Jetson Family Protection Trust".  Or you could name someone else as trustee, which is sometimes advisable.  This trust has many varieties.  Some are are designed for asset protection in general.  Some are designed to qualify for Medicaid or VA benefits in particular (and they are drafted differently depending on which). (Available everywhere.)

Joint Domestic Asset Protection Trust:  In a small minority of states (of which Tennessee is one), it is possible to create a trust with the couple's own assets, for the couple's own benefit, and also obtain asset protection.   This is usually not a suitable method for owing a primary residence, because it is not income-producing and often is encumbered, but in rare cases it might be an option.

About the Author

Nina Whitehurst

Attorney at Law Nina has been practicing law for over 30 years in the areas of estate planning, real estate and business law She is currently licensed in Alaska, Arizona, California, Colorado, Oregon and Tennessee. Her Martindale-Hubbell attorney rating is the highest achievable: 5 stars in peer...

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