When purchasing a home, homeowners must decide how they wish to hold title to the property. There are numerous considerations for how to take title including taxes, estate planning, avoiding probate and creditor protection. Below are common ways of holding title to a property in Arizona and some of the advantages and disadvantages for each.
Community Property– Only married people can hold title as community property. Each spouse holds an undivided one-half interest in the property. Each spouse may provide by will for the disposition of his or her community interest in the community real property. However, Arizona community property law requires both spouses to join in a conveyance or encumbrance of community real property.
Community Property with Right of Survivorship– This is another way for a married couple to hold title to real property. The advantage of holding title in this manner is that it allows one spouse’s half-interest in community property to pass to the surviving spouse without the need for a probate.
Joint Tenancy with Right of Survivorship– Two or more persons may hold title to real property as joint tenants with right of survivorship. Each joint tenant holds an equal and undivided interest in the estate. The advantage of a joint tenancy is that upon death of one of the joint tenants, their interest is transferred outside probate to the surviving joint tenant(s). Evidence of the intent of a married couple to hold title to real property as joint tenants with right of survivorship must be in writing so as to avoid the presumption of community property.
Tenancy in Common– Two or more persons may hold title to real property as tenants in common. Each tenant in common holds an undivided fractional interest in the estate. A tenant in common may transfer his or her undivided interest without destroying the co-tenancy estate. There are no survivorship rights in a tenancy in common, which means that each tenant’s share can be sold or devised to a third party.
Sole and Separate– Sole and separate property is real property owned by a spouse before marriage or real property acquired by a spouse during the marriage by gift, descent or specific intent to hold the title separate from the estate of the marital community. If a married person acquires title as sole and separate property, his or her spouse must execute a disclaimer deed.
This is a brief overview. To ensure title to your property is held in a manner that is most beneficial to you, you should consult with a competent real estate attorney and perhaps your tax advisor as well.