Forms of Title
When you are sitting at the title company about to sign papers and are asked how you would like to hold your title, you should know what type is best for you. If you ask the title company their recommendation, they will tell you they are unable to give legal advice. Should you hold real estate as community property, in joint tenancy or in some other form? The decision of how to hold real estate involves several considerations including probate, liability, and creditor claims, whether it is an investment property, that are all specific to your individual needs. This decision should be made only after consultation with an attorney experienced in real estate law in order to make the appropriate choice regarding title and your personal assets.
Many clients ask if they can avoid probate by holding real estate as joint tenants. The answer is yes, but it is not without pitfalls. Under joint tenancy, two or more people may hold property with proportionate but different amounts of interest and the last survivor takes the entire property. But people don’t always die in the anticipated order. This can cause tax problems that could be avoided. Generally spouses may want to consider holding real estate as community property with the right of survivorship, this allows for an automatic transfer upon death of one of the spouses. The "automatic" transfer, as opposed to deeding through a will, is what skips over probate.
Tenancy In Common
At least two people, but more if desired, may hold property as tenancy in common. Essentially, tenancy in common is exactly the same as joint tenants with rights of survivorship, without the rights of survivorship. This means that when one tenant (holder of title) dies, instead of automatically transferring to the other tenant(s), it is devised by will if one was left, or distributed through intestacy, where the tenant's heirs according to state statute take their share.
Arizona is one of only nine states in the United States that follow community property laws. Only legally married individuals may hold title as community property. Community property is where each spouse owns an equal share of the property. A one-half undivided interest. All property acquired during the marriage is deemed community property, unless it was gained by an inheritance or by gift. It does not matter if the property was bought and paid for by only one spouse, both spouses have equal rights in the property. However, spouses may determine by will the disposition of his or her interest in their portion of the community property.
The Arizona legislature has completed its work on A.R.S. § 33-431 and the amended version of this statute provides for a Community Property deed with rights of survivorship. The significance of this form of ownership is that married Arizona homeowners can now avoid probate while enjoying the tax benefits of community property. The survivor is now able to own 100% of the property instead of having only one half interest as previously prescribed by the community property laws. These benefits have not previously been combined. This new status can be created without the need for a "straw person," which is required with Joint Tenancy deeds with rights of survivorship, and it can be terminated by the recording of an affidavit. Arizona married homeowners should take advantage of this newer law.
Sole And Separate Property
While it is true that the default law in Arizona is that all marital property is community property, this presumption may be rebutted by executing a disclaimer deed. If the property was acquired prior to the marriage or by gift, devise, the option to hold the property sole and separately is available. By doing so, a married person is able to hold legal title to property without their spouse taking a one-half interest in the property. Of course, to protect the presumption of community property, your spouse must sign the disclaimer which protects marital harmony by assuring one spouse was not attempting to exclude the other spouse.
With multiple options of holding title combined with your personal circumstances, deciding how to take title can appear to be a daunting task. That is why consulting with an attorney is almost imperative to assure you are making the correct decision regarding your property. Platt & Westby, P.C., has a team of real estate attorneys who will walk you through this process. To discuss your estate planning and real estate title concerns with a diligent attorney, contact our office or call 602-277-4441 to speak with one of our Platt & Westby, P.C., real estate specialists today.