Why should you care about how you hold title to the real property you own? Many homeowners don't realize that the form of title in which property ownership is listed can have significant tax and legal ramifications. When choosing which form of ownership is best for you consider these options. (See "Common Forms of Ownership" for more details.)

Inheritance issues are important considerations. If you're married, property is deemed to be community property unless otherwise specified. Under standard community property arrangements, property passes to the surviving spouse and is subject to probate and estate taxes. A new form of title is sweeping across the country that allows married couples to specify community property with right of survivorship. This allows property to pass directly to the surviving spouse without going through probate or running up hefty estate taxes. Similarly, a title-holding trust arrangement enables beneficiaries to be named in the trust agreement, eliminating the need for probate.

WILLING PROPERTY TO HEIRS
Some forms of ownership do not allow property to be willed to your heirs. In joint tenancy, for example, when one owner dies, his share passes to the other remaining owners. Tenancy in common, by contrast, allows interest to be passed to an heir by will upon death of a co-owner. In a partnership arrangement, yet another legal twist applies: heirs cannot inherit a deceased partner's interest until after until the partnership is liquidated.

LIQUIDITY
And liquidity is yet another issue. Carefully consider your future need to sell your share of property before choosing a form of title. Under a tenancy in partnership arrangement, for example, no partner may sell his or her interest in the partnership property. A tenancy in common, by contrast, gives each co-owner a separate title and allows any owner to separately convey his or her interests.

You should also consider the amount of control you wish to have over decision-making regarding the property. In a title-holding trust, for instance, title is held by a trustee; designated parties are authorized to make decisions regarding sale of property and other important matters for the trustor, or beneficiary. To fully understand the consequences of various forms of property title, it's wise to consult an attorney or a certified public accountant before deciding which form of title to choosee.

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The number of owners and their relationships will also affect your options. Community property is restricted only to husbands and wives. Joint tenancy and tenancy in common allow any number of owners, whether related or not. Tenancy in partnership is restricted only to business partners. Trusts are options for individuals, groups, partnerships, or corporations.

The type of title you choose may also impact creditor's rights. Some forms of ownership allow creditors to seize and sell a co-owner's interest in a property; others prohibit this practice.

For more help determining which title option is best for you, ask me for the “Common Forms of Ownership” comparison chart.