Title to real property defines legal ownership of the property, and that ownership is usually identified by language in the deed showing who owns the property and how it is owned. Rights associated with property is also a matter of state law and can be altered by marital status.
There may be multiple times when you will need to decide how to title property – such as when you purchase property or when you give property to others during your lifetime or through your estate when you die. It is important to understand the different ways property can be owned before you make decisions on how to title it or whether a will may need to be probated.
The most common ways to hold title are:
- Sole Ownership
- Joint Tenancy with or without Right of Survivorship
- Tenants by the Entirety
- Tenants in Common
- Life Estate Tenant
- Community Property
Sole ownership is ownership by one individual or entity. The most common sole ownership is one held by a single person or a married person who wants to hold property apart from his or her spouse. Sole ownership might also be ownership by a business or trust.
It is important to realize that even if you are a sole owner, if you are married and the property is your homestead in Alabama, you will not be able to transfer the property without your spouse’s signature on the deed. It is also important to have your will in place to transfer the property at death since there is no right of survivorship with sole ownership. If you own property alone and die without a will your next of kin will inherit the property through the laws of intestacy (laws defining how property passes without a will).
Joint Tenancy with or without Right of Survivorship
Joint tenancy means that two or more people hold title to real estate jointly, and each has the right to occupy the full property during his or her lifetime.
If one of the owners die, his or her rights of ownership pass to the heirs unless the deed specifically states that the owners are joint tenants with right of survivorship, means that the property will automatically pass to the surviving owner. This is how many married couples own property in Alabama.
The primary advantage to joint tenancy with right of survivorship is that the death of the first of the joint owners does not require probate of his or her will. The property passes outside probate (outside the will) to the survivor. Expenses of upkeep, taxes, insurance, etc., are shared between the joint tenants.
You do not often see it, but property owned by joint tenants with right of survivorship can be severed (an owner’s share sold) resulting in the property thereafter being held as tenants in common.
A creditor who obtains a legal judgment against one of the owners can come after the property, requiring it to be divided, to have the debt satisfied.
Tenants by the Entirety
This method of ownership can only be used when owners are legally married. This type of ownership is generally not seen in Alabama, but it is mentioned in the code indicating at Code of Alabama § 43-7-4. There it states that:
Where there is no sufficient evidence that two joint tenants or tenants by the entirety have died otherwise than simultaneously, the property so held shall be distributed one half as if one had survived and one half as if the other had survived. If there are more than two joint tenants and all of them have so died, the property thus distributed shall be in the proportion that one bears to the whole number of joint tenants.
Property owned as tenants by the entirety cannot be severed, or one spouse cannot sell his or her share.
You will not own Alabama property in this manner, but you may see it in other jurisdictions such as Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming.
Tenants In Common
With tenancy in common two or more persons hold title to real estate jointly. They may own it equally or in unequal percentages. For example one may own 30 percent of the property while the other owns 70 percent, but despite those ultimate ownership shares, each owner has the right to occupy and use all of the property while the ownership percentages define the financial ownership of the real estate. If the property is sold, each will get his or her ownership percentage. Either owner may sell or give away his or her share of the property, and at death his or her share will pass to those named in a will or next of kin through inheritance. Each owner is responsible for all debts against the property (for instance both or all parties are responsible for all taxes due on the property).
Life Estate Tenant
You may have the right to occupy property during your lifetime through a life estate, and when you die people called the remaindermen instantly become the owners. Often in second marriages a spouse will leave a life estate to the widow and the remainder interest to his or her children. Another situation where life estate interests are seen is when a parent gives the property to children and retains a life estate in the deed.
While title is usually determined by the deed, that is not always true. In the case of heir property you may be living on property that was last deeded to your grandparents whose estates were never legally settled, and there is no deed in your name. In that event determining how your grandparent’s property passed by operation of law is necessary. Often this requires tracing family relationships and deaths over the course of several generations to land on who actually owns the property today.
There are nine community property states in the U.S.: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an opt-in community property state that gives both parties the option to make their property community property. Alabama is not a community property state.
Community property is a form of ownership by a married couple during marriage that they intend to own together. Each spouse owns the property equally, and owes any debt against the property equally regardless to who earned the money to purchase the property or incurred debt for which the creditor seeks to satisfy from the property value. In the event of divorce each spouse will gets an equal division of the property. In the event of death there is no survivorship unless the couple lives in a state that permits survivorship (Arizona, California, Nevada, Texas, Wisconsin). Outside those community property survivorship states the couple must have a Community Property Survivorship Agreement. Without living in a community property survivorship state or having a Community Property Agreement each partner’s share will pass through his or her estate.
The take away:
How you own property is just as important as the fact that you own it. What you can do with property – your rights and obligations – and how you can leave property to your heirs can only be determined by knowing how the title is currently held. If you are planning on any property acquisitions, transfers or estate distributions, it is critical that you understand how you already own or want to own or have your heirs own property.