TIP 9 - HOW TITLE TO REAL PROPERTY (Homes and Condos) IS HELD DEFINES EXTENT OF OWNERSHIP AND RESTRICTIONS ON ITS DISPOSITION
Arizona is one of the states in the American Southwest with property title laws derived from Spanish law when Spain owned Mexico and territory that became Arizona and New Mexico. As a result, property in Arizona owned by a married couple may elect to hold title to real property as Community Property. And later Arizona law expanded Community Property to add Community Property with Rights of Survivorship, with some similarities to Joint Tenancy with Rights of Survivorship (JTWROS).
Married couples holding title to real property as Community Property may separately devise by will one half of the estate to their specific heir or heirs, such as children from a prior marriage. But those holding Community Property with Rights of Survivorship, the interest of each spouse is 100% undivided ownership of the real property and upon the death of a spouse, 100% of the property passes to the surviving spouse outside of probate. But jointly owned property ownership held in Joint Tenancy with Rights of Survivorship (JTWROS) can be partitioned, with the approval of all joint tenants, and the interest sold to another party. Upon the death of a joint tenant, all partitioned interest in joint tenancy conveys to the surviving joint tenant titleholders.
Tenants In Common (TIC) hold title to real property in a proportion agreed to by all the other TIC owners of the property and this separately identified portion of the entire property may be bought, sold or encumbered separately or devised through probate. But all TIC owners must agree to conveyance or encumbrance of the whole property.
Lastly, 100% of the tax basis of Community Property may be stepped up upon the death of a spouse. But a property held as JTWROS, only the share held by the deceased tenant in joint tenancy could have their tax basis stepped up.
Before closing your purchase escrow, carefully consider the best method of holding title to real property. For estate planning purposes, inquire about recording a Beneficiary Deed to bypass probate and directly convey title to the entity named on the Beneficiary Deed upon the death of the last surviving owner of record.
ABOUT THE AUTHOR
Sam has 25+ years of residential real estate knowledge and experience. Learn more about these AZ cities in his service area: Chandler, Gilbert, Mesa, Phoenix, Scottsdale, Tempe, Arizona retirement communities and investment property.
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