Deciding what form of title to hold property in can be a mystifying choice. Depending on what your marital status is, what your financial circumstances are, what your wishes are for estate distribution may be, whether or not the property will be held in a business name, where your permanent residence is, etc., etc. - your decision may be affected. Arizona laws regarding holding title may be very different than other state laws you may be familiar with. Please understand that real estate agents are not supposed to advise you about how to take title to real property. This decision can have far reaching consequences and should properly be guided by both an accountant or other trusted financial advisor and an attorney. Each form of holding title has a variety of tax and legal consequences. Generally speaking, real estate agents (including me) will not have enough information about your personal circumstances, and do not know enough about the consequences of the different forms of title to give any advice on this subject. Please consult an accountant and an attorney on this matter.

COMMON FORMS OF HOLDING TITLE

TO REAL PROPERTY IN ARIZONA

TENANCY IN SEVERALTY (Sole and Separate Ownership)

Severalty ownership is ownership by one person - either natural or legal person (e.g., corporations, cities, etc.).

TENANCY IN COMMON

Co-ownership by two or more natural or legal persons with no right of survivorship. Arizona law assumes that property acquired by two or more persons other than husband and wife is held as tenants in common unless otherwise specified. Each person holds a separate and distinct undivided interest. There is unity of possession. There is no automatic right of survivorship. Upon one owner's death, his or her share passes to the heirs. A co-owner's interest may be sold at execution sale to satisfy his creditor. Creditor then becomes a tenant in common.

COMMUNITY PROPERTY

Only available to two lawfully married persons. Property received by gift or inheritance, purchased with separate funds or acquired prior to marriage remains separate property. Each spouse holds an undivided one-half interest. One spouse cannot partition the property by selling his or her interest. Both spouses must sign to convey real property. Creditors cannot seize and sell property separately. The whole property may be sold at execution sale to satisfy the creditor. At death, the deceased spouse's half passes to the heirs through probate, affidavit, or adjudication. The surviving spouse retains his or her half share in severalty. There is no automatic right of survivorship. Both halves of the community property are entitled to a "stepped up" tax basis as of the date of death.

JOINT TENANCY (Joint Tenancy with Right of Survivorship)

Shared ownership by two or more natural persons having the right of survivorship. Each joint tenant holds an equal and undivided interest in the estate. There is automatic right of survivorship. That is, upon the death of one joint tenant, that joint tenant's interest passes to the surviving tenant(s) automatically. Joint tenants can convey their interest without other joint tenants' permission. Person acquiring the joint tenant's interest becomes a Tenant in Common. A co-owner's interest may be sold at execution sale to satisfy creditor. Joint tenancy is broken, creditor becomes tenant in common. Joint tenants must exclude all other methods of ownership. The grantees must sign the deed in order to indicate their acceptance of joint tenancy. Four unities of Joint Tenancy must be present:

COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP

Created by Arizona legislature in 1994 to allow married persons to hold property as community property while living but at the death of either spouse the deceased spouse's interest passes to the surviving spouse, automatically, without probate.

ALSO NOTE :

Arizona is a community property state. Any property acquired by a married couple is presumed to be community property unless specifically designated otherwise. Another option not shown above is that Title may be held in a form called SOLE & SEPARATE. If this form is chosen by married persons, each party must execute a disclaimer deed to avoid the presumption of community property. Additionally, it is possible to hold title in the name of any legal entity - whether it be a corporation or other business ownership form, or any form of a legal trust. There may be any number of legal ways to hold title due to your circumstances.

PLEASE CONSIDER THIS A PRIMER ON THE SUBJECT ONLY AND DISCUSS YOUR BEST INTERESTS IN HOLDING TITLE TO REAL PROPERTY WITH YOUR FINANCIAL AND LEGAL ADVISORS. IF YOU DO NOT HAVE FINANCIAL AND LEGAL ADVISORS - FIND SOME!! - YOU ARE ABOUT TO MAKE THE SINGLE LARGEST PURCHASE YOU HAVE EVER MADE. YOUR DECISIONS REGARDING THE WAY YOU TAKE TITLE CAN HAVE SIGNIFICANT CONSEQUENCES FOR YOU, YOUR FAMILY, YOUR BUSINESS, AND YOUR HEIRS!

DISCLAIMER

John P. Hale is owner and Designated Broker of Touchstone Residential Realty, Inc., 2485 West Tom Watson Drive, Tucson, Arizona 85745.  He has been a residential real estate agent in the greater Tucson Metropolitan area since 2000.  In addition to being licensed as a Broker rather than a salesperson, John holds the following designations awarded by the National Association of REALTORS^®:  ABR – Accredited Buyer Representative, ASR – Accredited Seller Representative, CRS – Certified Residential Specialist, and GRI – Graduate Realtor Institute.  And, John is among the very few that have been named, MRE – Master of Real Estate by the Arizona Association of Real Estate.