Property ownership under the law is an interesting topic. No one ever thinks about property ownership until they buy something, like a house. Then one generally asks the real estate broker how they should hold title to their home. The problem with asking the broker is that the broker doesn’t really know. Each state in the US has its own rules about property ownership. If one person owns the property, the question is simple to answer. The person owns it outright. Questions arise when 2 or more people want to own the property together. The most common ways to own property in Arizona are the following: tenants in common, joint tenants with rights of survivorship, community property and community property with rights of survivorship. When you own a parcel of real estate with someone else, let’s say a married couple, there is not much difference in property ownership methods while both of you are alive. Each owner owns 1/2 of the whole. The differences show up when one person dies. Let’s look at each method of ownership separately. To make this easier the couple will be called A/B. A is the husband and B is the wife. Let’s assume A dies first. If the couple owns the property as tenants in common, on A’s first death, the survivor B keeps 1/2 of the property; and A’s heirs get the other 1/2. Generally, the heirs have to probate the estate to get their share. At B’s later death, B’s share passes to B’s heirs, also by the probate process. Typically couples use this method to protect children of a prior marriage and other loved ones. If the couple owns the property as joint tenancy with rights of survivorship, on A’s death, B keeps all of the property. There is no probate when A dies. However on the second death, the assets pass to B’s heirs. A’s heirs are left out. There is generally a probate on the second death. Typically couples use this method when there are no children from a prior marriage or other loved ones to protect. For the next two examples, the couple has to be legally married in a community property state, in order for the rules of community property to work. If the couple owns the property as community property, on A’s first death, the survivor B keeps 1/2 of the property; and A’s heirs get the other 1/2. Generally, the heirs have to probate the estate to get their share. At B’s later death, B’s share passes to B’s heirs, also by the probate process. There may also be an income tax benefit if certain income tax rules apply. The same rules apply here as apply in tenants as common. Typically couples use this method to protect children of a prior marriage and other loved ones If the couple owns the property as community property with rights of survivorship, on A’s death, B keeps all of the property. There is no probate when A dies. However on the second death, the assets pass to B’s heirs. A’s heirs are left out. There is generally a probate on the second death. Once again, there may be an income tax benefit if certain income tax rules apply. The same rules apply here as apply in joint tenants with rights of survivorship. Typically couples use this method when they don’t need to protect children of a prior marriage or other loved ones So finally, the best way to own property depends on each person’s inidvidual situation and the state in which they live.
