757-255-8090One aspect of your financial planning is deciding the terms on which you want to own your property. There are a surprising number of different options, with distinctions when it comes to terms of inheritance, tax status, and other aspects. We list some of them here, and we will go in more depth during your financial consultation.
Sole Ownership
The simplest type of property ownership, when one individual owns all interest and titles to a property. This property can be transferred during the owner’s lifetime through sale or gift, or after the owner’s death according to their will. In the absence of one, probate court may decide how the property will be distributed to survivors; however, the laws and rules governing this are different in most jurisdictions, sometimes markedly so.
Joint Tenancy
This form of ownership allows two or more people to hold an equal stake in a property, with rights of survivorship, meaning that in case of the death of one of the owners, their interest will pass onto the surviving co-tenants automatically. In order to jointly own a property, all the stakeholders must 1) acquire it at the same time, 2) have the same title to it, 3) own an equal share in it regardless of their contribution, and 4) have an equal right to possess the entire property. This is a good way to ensure one’s spouse automatically inherits a property, without having to go through the probate process.
Tenancy in Common
This type of ownership is similar to joint tenancy, in that a number of people hold stakes in one property. However, unlike the latter, they can hold stakes of different sizes, that may reflect their different contributions. Also, there is no right of succession in Tenancy in Common, and the stakeholder’s share passes to their designated heirs in case of their passing, instead of going to the other stakeholders. The breaking of any of the four requirements to joint tenancy creates a Tenancy in Common, including the transfer of their share by one of the tenants (since that breaks the requirement that all shares need to be acquired at the same time); this, however, can be renegotiated into a new joint tenancy.
Community Property
This is a type of property arrangement where everything owned and all income made by either spouse is owned equally and divided evenly between them, regardless of the contribution made by either. There are no specific laws that put specific requirements on either spouse on the way their half of the property is disposed of. Only nine states currently recognize such an arrangement: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin.
Gifts
This is another way of transferring property. Gifts may be subject to tax; however, if it’s an item, such as a house, that has increased in market value since it was purchased, only the original cost will be used for assessing taxes (“basis”), creating an opportunity to save on tax. Most gifts are made when the grantor is alive, however, there is a provision in law for giving in anticipation of one’s death.