There are several ways to take ownership of real property, each with its own implications for ownership rights, transferability, and estate planning:
1. Sole Ownership: when one person or entity holds title to the property. The person or legal entity has full control over the property and can transfer ownership through with a legal instrument.
2. Joint Tenancy with Right of Survivorship: when two or more individuals hold an equal interest in the property with the right of survivorship. If one of the individuals dies, that individual’s interest in the property automatically transfer to the surviving individual owner(s). Each individual owner has an equal right to the real property. A joint tenancy with the right of survivorship can only be established if: (a) the owners acquire the property at the same time (“unity in time”), (b) have the same title (“unity in title”), (c) have an undivided interest in the property (“unity in interest”), and (d) have the same right to possess the entire property (“unity in possession”).
3. Tenancy in Common: when two or more individuals hold an equal or unequal percentage of interest in real property. Each owner has the right to transfer his or her interest in the property to another party and each owner’s interest passes to his or her heirs or beneficiaries upon death. Unless the deed specifies another method that the owners are taking title to the property, any transfer of real property to two or more individuals is by default presumed to be a tenancy in common. Unless two or more individuals create an entity such as a limited liability company to hold ownership of the real property, investors who purchase real property in their individual names will hold the real property as tenants in common.
4. Trust Ownership: real property can be held in trust with a trustee managing the property for the benefit of the beneficiaries. Holding real property in a trust can provide for privacy, avoid probate (the judicial process for distributing property after death) and allow for specific instructions on how the property should be managed, sold or distributed. The most common types of trusts are: (a) a revocable trust, also known as a living trust, which can be revoked during the trustor’s lifetime, and (b) an irrevocable trust, which cannot be changed or terminated once it is created.
5. Life Estate: a property owner can transfer ownership of real property to another while retaining the right to use and occupy the real property for the duration of the owner’s life. Upon the owner’s death, the property transfers to the remainderman – another individual. The individual who holds the life estate can lease and mortgage the property but the lease and mortgage will terminate upon the owner’s death.
When taking ownership of real property, it is important to consider factors such as how ownership will be shared, rights of survivorship, tax implications and estate planning goals. Consult with Louts Law, a Denver real estate law firm, and speak with an experienced real estate attorney in Denver, Colorado to help you choose the most appropriate form of ownership based on your individual circumstances and goals.
