When you buy a home, there are two different documents that are most important regarding the actual ownership of the property. The first is your deed and the second is your title. The terms are sometimes used synonymously with each other, but they’re different. If you’re buying a home, you may want to understand these differences.
There are also several ways to take title that can affect the way property is passed from you to someone else. The goal of this post is to bring you up to date on these distinctions.
What Is a Deed Versus a Title?
A deed and a title are two different items that both state your ownership rights on a property. However, there are differences between the two.
A deed is the actual physical document that you get on closing day and it says you own the property.
A title also provides proof of ownership, but this certificate also contains a physical description of the property. It will also contain any liens that exist on the property that might allow others to have a claim to the property in certain situations.
An example of a lien would be your mortgage. You may also have a lien from a contractor until work is paid off.
There’s also a concept known as chain of title. Chain of title is the complete ownership history of the property.
For example, the chain of title might show that the property passed from John Smith to Jane Doe to Mike Jacobs.
Ways to Hold Title
The way your title is worded (also referred to as “the manner in which title will be held”) can affect the way ownership is transferred and your rights to transfer ownership. The way you word your title may depend on both your marital status and your personal wishes. Let’s run through some scenarios.
if you’re looking to own property on your own, the following titles apply.
If you are a man or a woman who is not married, your title should read:
- John Smith, a single man OR
- Jane Johnson, a single woman
If you are a man or woman who has been married and is now legally divorced, your title should read:
- John Smith, an unmarried man OR
- Jane Johnson, an unmarried woman
If you are a married man or woman who wishes to acquire title as a sole and separate property, then your spouse must consent and relinquish all rights, title and interest in the property by deed or other written agreement. Your title should read:
- John Smith, a married man, as his sole and separate property OR
- Jane Johnson, a married woman, as her sole and separate property
Looking to hold title jointly? Check out the options and examples below:
Community Property (applicable in certain states)
This form of ownership is when a property is acquired by a husband and wife during their marriage, other than by gift, bequest, devise and descent, or as the separate property of either. It is presumed to be held as community property. Under community property, either spouse has the right to dispose of his or her half interest in the property or will it to another party.
EXAMPLE: John Smith and Jane Smith, husband and wife, as community property
Community Property with Right of Survivorship (applicable in certain states)
This form of community property combines features from both joint tenancy and community property. In community property with right of survivorship, upon the death of one spouse, the survivor receives the deceased’s share (half) of the property. The property would automatically pass to the surviving spouse.
EXAMPLE: John Smith and Jane Smith, husband and wife, as community property with right of survivorship
Traditional Joint Tenancy
Joint and equal interests in land owned by two or more individuals created under a single instrument with the right of survivorship.
EXAMPLE: John Smith and Jane Smith, Husband and Wife, as Joint Tenants
Tenancy in Common
Under tenancy in common, the co-owners own undivided interest or equal rights to enjoy the property during their lives. This differs from joint tenancy because tenants in common hold title individually for their share of the property and can dispose or will their individual ownership. But unlike joint tenancy, there is no right of survivorship and no other tenant is entitled to receive the decedent’s share of the property. Instead, the property goes to the decedent’s heirs.
EXAMPLE: John Smith and Jane Johnson, as tenants in common
A living trust of real property holds legal and equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all management rights and responsibilities.
EXAMPLE: John Smith, as Trustee of the John Smith Trust dated July 3, 2002
How you hold title to your real estate can affect the outcome of the sale of a property. It can also affect the taxes and fees associated with selling your home. For more information or assistance in determining the best way to hold title for your unique situation, contact your real estate attorney or tax advisor.
Check out this article for more common title issues.