The BIG day has arrived, Closing day! You sit down with your escrow agent, pen in hand. The anticipation is building. All you want to do is sign your name on the dotted line. The escrow agent reaches for your file. With a loud and seeminly overly dramatic thud, drops a large mountain of papers in front of you. You think to yourself “how long will I be in here? Hours? Days? Weeks?” You also think to yourself “Thank goodness my Real Estate Agents prepared me for this mountain of paperwork!” You begin to start signing and before you know it you’re done. You have successfully closed escrow on your new home.
Our jobs as REALTORS® go beyond listing and selling homes. It is also our responsibility to give you, our Client knowledgable choices. When it’s time to sign the important “mountain of paperwork” you need to know exactly what you’re signing. One item that I see often over looked by Clients is Title. The Ways to take title vary state by state. Here in Arizona there are four title categories with their own distinct stipulations. It’s important to decide before you’re at the escrow table which category fits your needs.
I’ve outlined each category below for informational purposes only. Each method of taking title has certain significant legal and tax consequences; therefore, you are encouraged to obtain advice from an attorney or other qualified professional.
Ways To Take Title In ARIZONA
- Community Property
- Community Propert With Right of Survivorship
- Tenancy in Common
- Joint Tenancy With Right of Survivorship
Community Property
- Requires a valid marriage between two persons.
- Each spouse holds an undivided one-half interest in the estate.
- One spouse cannot partition the property by selling his or her interest.
- Requires signatures of both spouses to convey or encumber.
- Each spouse can devise (will) one-half of the community property.
- Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication.
- Both halves of the community property are entitled to a “stepped up” tax basis as of the date of death.
Community Property With Right Of Survivorship
- Requires a valid marriage between two persons.
- Each spouse holds an undivided one-half interest in the estate.
- One spouse cannot partition the property by selling his or her interest.
- Requires signatures of both spouses to convey or encumber.
- State passes to the surviving spouse outside of probate.
- No court action required to “clear” title upon the first death.
- Both halves of the community property are entitled to a “stepped up” tax.
Tenancy In Common
- Parties need not be married; may be more than two tenants in common.
- Each tenant in common holds an undivided fractional interest in the estate. Can be disproportionate, e.g.,20% and 80%; 60% and 40%; 20%, 20%, 20% and 40%; etc.
- Each tenant’s share can be conveyed, mortgaged or devised to a third party.
- Requires signatures of all tenants to convey
or encumber the whole. - Upon death the tenant’s proportionate share passes to his or her heirs by will or intestacy.
- Upon death the estate of the decedent must be “cleared” through probate, affidavit or adjudication.
- Each share has its own tax basis.
Joint Tenancy With Right Of Survivorship
- Parties need not be married; may be more than two joint tenants.
- Each joint tenant holds an equal and undivided interest in the estate, unity of interest.
- One joint tenant can partition the property by selling his or her joint interest.
- Requires signatures of all joint tenants to convey or encumber the whole.
- Estate passes to surviving joint tenants outside of probate.
- No court action required to “clear” title upon the death of joint tenant(s).
- Deceased tenant’s share is entitled to a “stepped up” tax basis as of the date of death.
Note:
Arizona is a community property state. Property acquired by a husband and wife is presumed to be community property unless legally specified otherwise. Title may be held as “Sole and Separate.” If a married person acquires title as sole and separate, his or her spouse must execute a disclaimer deed to avoid the presumption of community property. Parties may choose to hold title in the name of an entity, e.g., a corporation; a limited liability company; a partnership (general or limited), or a trust.
