Probate Versus Living Trust: How You Hold Title Makes a Difference

This article from our own Kelly Vincelette, at Cornerstone Title.

 

The way in which people hold title to a property can have significant legal and tax implications,

including whether the property must go through probate upon death and what taxes the heirs must pay when they sell it.
 
According to some attorneys, one of the best ways to hold title to homes and other real property, is in a revocable living trust, which offers the advantage of avoiding probate costs and delays. All that is involved is the cost of creating such a trust, and deeding the property into it.
 
Until the death or disability of the trust creator, the home and other real estate in the living trust, plus any stocks, bonds, bank accounts, automobiles or other major assets held in the living trust, may be bought, sold and financed at the creator’s discretion.
 
If the trustor becomes incapacitated, the named alternate trustor (such as a spouse or adult child) takes over management of the trust assets. When the trustor dies, the assets are distributed according to the trust's terms.

 Privacy is also an advantage. Unlike a will, which becomes part of the public probate file, the living trust terms remain private. Court challenges of living trusts are virtually impossible, whereas wills are frequently challenged by disappointed relatives.
 

There are other customary ways to hold title, such as:

-          Sole ownership - You hold the title in your name alone.

-          Tenancy in common - This means two people own the property together, but upon the death of one, the interest of the descendent is distributed according to a will – or if there is no will, according to state law.

-          Joint tenancy - This is a commonly used option, which means two people own the property together. If one dies, the other gets it without the property passing through probate.

 People should always evaluate which form of title is right for their situation with a California qualified real estate attorney.

Original article from Barbara Pronin, author at RISMedia.

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Francis

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Real Estate Ownership: how to hold title to your real estate

The question of how to hold title to your property comes up every time as you get ready to finalize the process of buying a home, "sign off", and tell the escrow/title company how to register that new home that you purchase.
This is not something that a Realtor can advise you on (nor the escrow officer BTW), because it is definitely a legal matter, and it does also have tax implications.  The various ways to hold title can be in good part summarized as indicated below:

-  Sole ownership –In this scenario, property is owned entirely by one person, who can do whatever he or she wishes with it without permission from another party. If the sole owner dies without a will, the property passes according to the state law where it is located. In some cases, the court that has jurisdiction will appoint an executor to oversee disposition of the estate.
-  Joint tenancy – As joint tenants, each person who has a share of ownership owns an equal share of the property. If one owner dies, that share passes automatically to the remaining owner(s).
-  Tenants in Common – In this case, a property is owned by two or more people at the same time, but the proportionate interests and right to possess and enjoy the property need not be equal. The owners can sell their share of the property if they wish and, upon death, the decedent’s interest passes to his/her heirs who then become new tenants in common with the surviving owners. (None of the tenants in common automatically receive, by default, the share of the decedent.)
-  Community Property – In the nine states that recognize community property, including California, any property you acquire while married is considered community property, and is equally owned between you and your spouse. This becomes especially relevant in the event of divorce.

-  Community Property with Right of Survivorship - this (more recent) method is very often used nowadays around here in California, as it combines some of the advantages of owning from both Joint Tenancy and Community Property.
-  and there are many other ways of holding title, among others in an LLC, or an LLP, or also, very common around our areas where properties are so high in value, in a Trust.

This is why it you are not certain how you want to hold title to your real estate asset, it is best to inquire ahead of time, ideally with a licensed California real estate attorney. 

I have found that even people who've owned a property for a long time should revisit this important matter, as needs and life situations change over time.
Contact me if you need some resources, and do not just base your decision on the information above ;-)

As always, thank you for reading!

Francis

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