Buying a home as a married couple involves a critical legal decision known as “vesting title,” which determines how the property is owned and what happens to it in various situations like death, divorce, or sale.
Understanding Vesting Title for Married Couples
“Vesting title” is the legal way you hold ownership of real estate. For married couples, choosing the right vesting type affects ownership shares, inheritance, creditor rights, and tax outcomes. The options available often depend on your state laws.
Common Vesting Options for Married Couples
1. Joint Tenancy with Right of Survivorship (JTWROS)
This is a popular option where spouses own equal shares with an undivided right to the entire property. The defining feature is the “right of survivorship,” meaning if one spouse dies, the surviving spouse automatically inherits the entire property without probate.
2. Community Property
Available in community property states (such as California, Texas, and Arizona), this law presumes that most property acquired during marriage is owned 50/50. When you title property as community property, it formally reflects this shared ownership. It offers a tax advantage known as the “double step-up in basis,” allowing the property’s tax value to reset to market value upon the first spouse’s death, reducing capital gains tax if sold later.
Some community property states also offer “Community Property with Right of Survivorship,” combining automatic transfer like JTWROS with community property tax benefits.
3. Tenancy by the Entirety (TBE)
Available in about half the states and exclusively for married couples, Tenancy by the Entirety includes right of survivorship and adds strong creditor protection. One spouse cannot sell or encumber the property without the other’s consent. Moreover, creditors typically cannot claim the property to satisfy debts owed by just one spouse.
4. Tenancy in Common
More common among unmarried co-owners, this allows spouses to own unequal shares (e.g., 60/40). It lacks the right of survivorship, so a decedent’s share passes to heirs as specified in their will. This option is sometimes chosen in cases like second marriages where inheritance goals differ.
Key Considerations
- State Laws Matter: Vesting options and their benefits depend heavily on your state’s property laws.
- Avoid Adding Children to Title Without Advice: Including children can cause unintended tax consequences and complicate future sales or refinancing.
- Consult Professionals: A real estate attorney or financial advisor can tailor recommendations based on your unique circumstances.
Vesting Options Comparison
| Vesting Type | Ownership Shares | On Death | Notable Feature |
|---|---|---|---|
| Joint Tenancy (JTWROS) | Equal, undivided | Automatically to surviving spouse | Avoids probate |
| Community Property | 50/50 | Survivorship or per will/state law | Double step-up in basis tax benefit |
| Tenancy by Entirety | Single marital unit | Automatically to surviving spouse | Creditor protection |
| Tenancy in Common | Unequal allowed | Passes to heirs per will | Flexible ownership shares |
For detailed insights on title rights and creditor protections, see our article on Title Vesting Issues.
Final Thoughts
Choosing how to vest title affects not just who owns the property, but also your tax liabilities, estate planning, and protection against creditors. To safeguard your marital property effectively, consult a qualified real estate attorney or financial planner familiar with your state’s laws.
References:
- IRS, Publication 555, “Community Property” (https://www.irs.gov/publications/p555)
- Investopedia, “Right of Survivorship” (https://www.investopedia.com/terms/r/rightofsurvivorship.asp)
- Cornell Law School Legal Information Institute, “Tenancy by the Entirety” (https://www.law.cornell.edu/wex/tenancy_by_the_entirety)
For more on related real estate and ownership topics, visit our Glossary Archives.