Implications of Property Ownership

This section considers four of the most conventional methods of ownership and compares the benefits of each.

Sole Ownership
Sole ownership is the condition where one individual possesses full proprietary control of a particular property. In order to transfer this control, documents known as the laws of intestate succession must be completed. When the owner passes, his/her estate contains the entire interest, which increases the original purchase price to match the fair market value. Fortunately, this cancels out a capital gain.

Joint Tenancy
Joint tenancy, which is subject to probate and transferred by operation of law, is equally shared ownership of property between two or more people. The full value of the property is factored into the deceased's estate. An extension of joint tenancy is the concept known as qualified joint tenancy, which exists when spouses share an equal interest in property and receive specific tax benefits. Half of the estate is factored into the deceased's estate.

Finally, tenancy by the entirety is essentially the same as joint tenancy; however, it is established between spouses and is subject to consent before a transfer can take place.

Tenancy in Common
This concept allows ownership to split amongst multiple people in various percentages, and transfers are accomplished with the standard transfer documents; however, operation of law is not applicable in this case.

Community Property
Community property implies a husband and wife own equal portions of property, no matter who actually earned or received the property. In addition, the earnings and revenue generated from the property are products of the community of the spouses and not the individuals themselves. Finally, each spouse is welcome to give their portions of property to whomever he/she chooses.

Community property laws apply in California, Idaho, Wisconsin, Louisiana, Nevada, New Mexico, Texas, Washington, and Arizona.

This information is presented to educate the reader and does not constitute professional tax and legal advice.
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