“How Should My Real Estate be Titled?”

By Adil Daudi, Esq.

Often times a purchase of a home is considered to being the largest purchase one would ever make, as well as it being the most valuable asset one would ever own. Compounding that with the fact that we live in one of the most litigious societies in the world and it could be apparent that protecting that asset would be a priority.

However, it is unfortunate that how often people overlook the titling of their property and don’t give it the consideration it deserves. The following are some common ways people are able to hold title to their property:

1.    Personal Name: One of the most popular methods used is to hold property in one’s personal name. However, this could have some serious consequences. Firstly, in the event an individual becomes mentally incompetent and/or physically incapacitated and a refinance on the property is needed, or additional credit is required, the individual is no longer able to perform such acts. In such a situation the court would be required to be intervene and appoint someone to act on their behalf.

If no planning was done ahead of time, such as a Power of Attorney, then court involvement becomes inevitable, which will last essentially up until the time of recovery or death. Furthermore, going through this process would only be a burden to the individually financially and emotionally.

In addition, by placing a home in one’s personal name, upon death the property would be forced to go through probate, which would only further delay the process of it being distributed to the beneficiaries, not to mention the additional cost of probate court fees.

2.    Joint with Right of Survivorship: Under joint situations, this is clearly the most applicable method to hold title. However, this too comes with drawbacks. Too often people, in order to avoid probate, parents would place their children jointly on property to ensure they receive it upon their death. Although it is common for parents to do this, they fail to realize the negative effects that could have.

Granted, upon the death of one owner, the survivors obtain full ownership over the property without having to go through probate. However, if avoiding probate is the intent of all jointly held owners, then this method only delays the inevitable. Much to peoples surprise, it is possible for owners to pass away at the same time; or eventually upon the death of one, the survivor will pass away at some point, which means if no planning was done beforehand then probate would become an issue.

Furthermore, by having a joint owner on a piece of property, both owners expose themselves to each other’s debts and liabilities. In the event one owner is found liable in a lawsuit, the jointly held property can be exposed and seized as part of the settlement.

3.    Tenants by the Entirety: This method is only available in Michigan for married couples, where when one spouse dies, their share automatically transfers to the surviving spouse.

4.    Tenants in Common: Under this method each owner has a certain percentage of ownership, which upon death is distributed as per their estate plan. If no estate plan is made, the property will be forced to go through probate.

5.    Revocable Living Trusts: One of the most under-utilized methods available is transferring title to a Revocable Trust. All concerns applicable for when an owner becomes incompetent or incapacitated are resolved under this approach as your Trustee and/or Power of Attorney is appointed beforehand to ensure your affairs are handled accordingly. Further, because title of the property is no longer in one’s personal name, court involvement is avoided, and upon the death of the individual, the property will be distributed outside of probate and pursuant to the instructions laid out in the Trust.

Essentially, the creation of a revocable trust provides substantial benefits to those who have property to distribute, as well as the intention of avoiding probate.

Conclusion: With several different methods available for titling property it is important to place proper attention and consideration on which method is most appropriate. Several unfortunate situations have occurred on families where children did not receive their parents’ home because of mistitling their property. Be sure to consult with an attorney to discuss which method would be best for you.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Shariah Estate Planning, Health Care Law, Business Litigation, and Corporate Formations. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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