Taking Title of Your New House

How you take title in your new home is key decision. Unfortunately, in the euphoria of the moment, many new homeowners don't put much thought into it.

Title

When purchasing a new home, you become the title owner of record. Essentially, this means you are listed in public records as the legal owner. This may sound like a simple concept, but how you're classified as an owner can impact legal and tax issues. Here are some issues to consider when taking title.

Single Owner

If you are purchasing the property on your own, there is really only one title choice. Yep, you are going to be listed as the sole owner, to wit, in your own name. If you are investing in rental or commercial properties, you should speak with a lawyer about purchasing the properties through a limited liability company to limit potential liabilities.

Two or More Owners

If you're married, many states require you to take title in a property as community property. In such states, you and a spouse are automatically considered to be joint owners regardless of any other factors. Community property title can have tremendous but macabre tax benefits. If one spouse dies, the living spouse gets a "step up" basis for tax consequence and huge capital gains taxes. For instance, if you purchased a home for $200,000 and it is worth $400,000 when a spouse dies, the remaining spouse gets to figure any capital gains using $400,000 as the cost of the house instead of $200,000.

Joint Tenancy

In some states, spouses are not required to take community property title. Instead, they and any collection of two or more owners may take title in joint tenancy. The advantages of joint tenancy are twofold. First, you get the step up basis mentioned above. Second, title in the property automatically transfers to surviving owners upon the death of one owner. This means you get to avoid probate, an expensive and lengthy court process.

Taking Title

When buying a home, don't just pick title willy- nilly. Take the time to explore the options in your state and pick the best one for you.