Q: What are the differences between some common forms of property ownership?
There are a variety of ways that one can hold title to property:
Sole Ownership: owned by a single person.
Tenants in Common: a co-ownership in which property is owned by two or more people simultaneously. Interests, shares, and rights to the property are not necessarily equal between tenants in common. When one tenant passes away, the title passes to those specified in their will, who then become new tenants in common with the other tenants in common.
Joint Tenancy: a co-ownership in which property is owned by two or more persons simultaneously, but, unlike tenants in common, the shares are equal. Each joint tenant has an undivided right to possess the entire property and a proportionate right of equal ownership interest. In the event of one joint owner passing away, their shares pass on to the remaining tenant (or tenants). Joint tenancy is not available in all states.
Tenancy by the Entirety: a variation of joint tenancy where the tenants are husband and wife — with each owning 50% of the shares. Neither partner is permitted to sell the property without the express consent of the other. Like joint tenancy, this form of ownership is not available in each state.
Community Property: available only in “community property” states, this is a co-ownership between spouses. In the event of death, interests pass similarly to tenants in common.
Trusts: This is not a form of ownership, but you may possess property through a Living Trust. If you were to pass away, your shares would transfer to the heirs assigned in your trust.
Q: What is the difference between a cooperative and a condominium?
Q: What is the purpose of “recording” a deed?
Q: What tax advantage do I get by owning real property?
Mortgage interest deduction advantages: The major advantage to owning real property is the ability to deduct the interest of a home equity loan and a home mortgage. To qualify for an income tax deduction for interest paid on a mortgage, the loan must be earmarked for a home (or vacation property) that is not rented to other parties.
Property tax deduction: real estate taxes paid to any state or local governments are also deductible on your federal return. Generally, the taxes must be based on the assessed value of the real property and must be charged uniformly against all property under the jurisdiction of the taxing authority.
Capital gains exemption: Once you sell your residence, you may exclude up to $250,000 ($500,000 for married couples) from any realized capital gains. In order to qualify, you must meet certain requirements: among other things, you must have lived in that home for at least two of the five years prior to the sale, and not have excluded gain from the sale of another home two years prior to the sale.
Q: What is a quitclaim deed?
A quitclaim deed transfers interest in a piece of real property from an owner (or “grantor”) to a recipient (or “grantee”) The grantor essentially gives up their rights and claims to the property, which allows the claim to pass to the grantee. A quitclaim carries no express or implied guarantees.
Q: Since my spouse passed away, I want to re-title my house so I own it jointly with my adult children. Is this a good idea?
For the most part, no. While there are benefits to sharing title to property, designating a joint tenant can have a negative impact. Naming a joint tenant to your property means that a portion of that property has been gifted to the new tenant. When gifts are made in excess of $13,000 in value in a single calendar year, the Internal Revenue Services requires the filing of a gift tax return and, sometimes, payment of gift taxes. Additionally, when you gift interest in property, your assets can be at risk if your new joint tenant is involved in a divorce or has creditors. Any tax exemptions you may enjoy may be jeopardized, as well.
Creating a Living Trust while naming your children as beneficiaries of the Trust after your passing is a better solution. You avoid probate, and yet retain total control in the property before passing on ownership. Additionally, you are free to switch beneficiaries as you see fit.
Q: What is the “Closing”?
A closing of a real estate transaction is the final meeting of the parties involved in said transaction, which is typically held at your escrow officer’s office. The final documents associated with the sale of the property are examined, signed, and the transaction is completed. Attorneys for the bank, the buyer, and the seller meet with the sellers and buyers and officially transfer title to the buyers. A title insurance company representative will also be present to facilitate the transfer of title and record the new deed.
David F. Anderson attorney at law located in Miami, Florida specializes in long term care, Condominium law, Medicaid planning, Corporate structures, Residential real estate, Asset protection, Commercial real estate, Family law, Title insurance, Bankruptcy, Mortgage law, Association Law throughout Dade County, FL and the surrounding area