Upon purchasing a new home, you and/or your spouse will come across a document that asks how you would like to take vesting on the property. Another time you’ll hear about title vesting is if you’re part of a group of friends or relatives buying a property together, such as a vacation home or cabin.
It can be a confusing question in the world of real estate, and your answer can significantly impact your rights as an owner. That is why it is important to know the ins and outs of title vesting when buying a property. If you feel stuck, no worries; we are here to talk about what title vesting is and everything you need to know to feel comfortable when making a decision.
What is Title Vesting?
Title vesting is simply taking ownership and the official rights of the title on a property. It is necessary when more than one individual appears as the property owner on the title.
How you hold vesting is dependent on a few factors:
- Are you married?
- Do you share ownership equally with another individual?
- Do you own a portion of the property in relation to what you pay for it?
These are all factors that come into play when deciding on how to take ownership of the property.
In most states, there are four common ways to hold a title. Which you decide to take is mostly dependent on how you answered the questions above.
However, before making a snap decision, there are some things to keep in consideration.
- Sole Owner: For when there is a single owner of the property. No Vesting is required.
- Tenants by the Entirety: Special form of tenancy put solely in place for married couples. It bases itself on the legal belief that a married couple creates a “whole,” and both owners have an undivided interest in the property. The right of survivorship typically entails that the surviving spouse shall inherit the deceased’s portion of ownership. The tenancy can only be severed by death, divorce, or by acts of both parties.
- Joint Tenants: For when two or more people have an undivided interest in the property. Joint tenancy can be severed if one owner decides to convey their interest in the property to another. Typically, the surviving owner becomes the sole owner with the right of survivorship, or it will revert to tenancy in common unless the deed expresses otherwise.
- Tenants in Common: For when two or more owners share equal, or unequal if stated in the deed, undivided interests of a single property. There is no right of survivorship, and each deceased owner’s portion will be passed to their heirs unless stated otherwise in their will.
How do you hold Title Vesting?
If you are purchasing a property and your name is the only one on the title, you will, by default, list as sole owner, and no vesting is necessary.
Any time when more than one person’s name appears on the title, you will hold vesting on the title. How you do so depends on the intentions and interests of those who hold vesting.
In most cases, not all, a married couple will decide to hold vesting as Tenants by the Entireties unless they agree to grant sole ownership to an individual.
Couples who are not married may choose to list as Joint tenants. That is because survivorship’s rights can protect their interests of the property from being void or the title from reverting to tenants in common, but it still gives them room to convey their interests as they choose.
Joint Tenancy isn’t just reserved for couples and can be held by any two or more people who want to own equal, undivided interests in a property.
Rights of survivorship are also necessary when deciding how to hold vesting in a property. The rights of survivorship pass ownership to co-owners as expressed in the deed without going through probate.
Passing ownership to the co-owners can be highly desirable in many instances unless the owners agree to pass ownership on to heirs or otherwise through their Wills. In this case, the default Tenants in Common is desirable.
Do keep in mind that lien protection may be part of the type of vesting you hold. Tenants in Common does not offer lien protection, and if an owner has a lien or judgment against them, it can eventually lead to the sale of the entire property to satisfy it.
What is a vested owner?
Vested ownership simply refers to the person who owns a property in entirety. For example, if a married couple vested as Tenants by the Entireties and one of them dies, the surviving spouse will be listed as the vested owner through the rights of survivorship.
One may also attain vested ownership through other agreements and legal practices so long as their title allows it. If you have any other questions about title vesting, talk to your title insurance company or feel free to contact us and we’ll be happy to assist.