Whether you have recently inherited land, currently own land or are looking to invest in land, it is important to know the different ways property title is held and what each form entails. The following provides general information on the topic, but a discussion with your legal counsel is appropriate when making any purchase or ownership structure change.
Sole Ownership is a form of ownership in which full ownership of the property and all assets belong to a single individual. While appealing to many, this form makes it difficult for the heirs of the property owner. In the case of death of the property owner, the heirs must probate the estate, which can be time consuming and expensive. If a single individual passes with or without a will, the heir(s) should seek legal counsel to move forward with probate. This process might be necessary in multiple states if the deceased had assets in other states than where he/she resided.
Another form of ownership is Joint Tenancy. In this form, two or more individuals own a property. The owners each retain equal shares as well as equal rights of the property, meaning they share all income, expenses and use of the property equally. The right of survivorship is a key component of joint tenancy. In the case of death of one or more owners, sole ownership is passed on to the last surviving owner. Right of survivorship also means that the surviving owner can avoid probate, and the transfer of ownership can easily be passed along after death. If one of the owners has any outstanding debts, creditors may be entitled to collect any amount that may be owed using a forced sale of an asset. Under joint tenancy, every owner must agree on the sale or transfer of the property.
Tenancy in Common is established when two or more people own a property. Unlike joint tenancy, owners under tenancy in common do not have to share ownership, income or rights equally. The tenants may decide how to split the assets in any manner they desire. Tenancy in common does not include right of survivorship. In the case of death of one of the tenants, the heirs of said tenant enter the ownership agreement with the surviving tenants.
Tenancy by the Entirety is a form of ownership in which a husband and a wife share equal ownership, rights and income of a property. This form of ownership includes right of survivorship. In the case of death of an owner, the surviving spouse assumes the property and all assets in entirety. In the case of divorce, the two owners become tenants in common, and both owners must agree fully on a sale or transfer of the property.
An Owning Corporation occurs when property is owned by the shareholders of a company. This form of ownership limits liability. If an accident happens on the property resulting in injury, the corporation that owns the land may be liable. An Owning Partnership (LLCs) is a form of ownership in which liability is limited for the members of the LLC. As with a corporation, the LLC members’ liability will likely be limited to the entity.
An Owning Trust is a form of ownership in which a trustee is designated to manage the property on behalf of the beneficiaries of the property. The trustee acts in the direction desired by the trustor. In the case of death of the trustor, his/her interest in the trust is passed along to the beneficiaries. The trust structure and purpose will determine how it operates, when it can be closed and how the remainderman receives title.