When you buy real estate, how you take title to property decides who controls it, what happens when an owner dies, whether creditors can reach it, and how much tax your heirs eventually pay. The main options are sole ownership, joint tenancy with right of survivorship, tenancy in common, tenancy by the entirety, community property, ownership through a trust, and ownership through a business entity like an LLC. The right choice depends on who’s on the deed with you, what you want to happen at death, and how exposed the property is to lawsuits and taxes. Most buyers spend about thirty seconds on this question at closing, and the wrong answer can force the property through probate, expose it to a spouse’s creditors, or hand your children a surprise capital gains bill.
Sole Ownership
Sole ownership means one person or one entity holds the entire interest. You can sell, lease, mortgage, or give the property away without anyone else’s signature. The simplicity is also the problem. When a sole owner dies, the property almost always has to pass through probate before heirs can take control, which means court fees, delays, and a public record of the transfer. If you become incapacitated, someone will need a court-appointed guardianship or conservatorship to manage the property for you. Sole ownership works for single buyers who plan to add a trust or other estate planning tool later. Married buyers should think hard before putting a home in just one spouse’s name.
Joint Tenancy With Right of Survivorship
Joint tenancy gives two or more owners equal shares with one powerful feature: when one owner dies, their share passes automatically to the surviving owners, outside probate. That right of survivorship overrides whatever the deceased owner’s will says. If three people hold title as joint tenants and one dies, the two survivors each end up with half. The deceased owner’s children or other heirs get nothing from the property.
Joint tenancy requires that all owners take their interests at the same time, through the same deed, and in equal shares. Break any of those conditions and the arrangement can convert into a tenancy in common. One joint tenant can also sever the arrangement without the others’ consent, by transferring their interest to someone else or even back to themselves through a new deed. Once severed, the transferred share becomes a tenancy in common and the right of survivorship no longer applies to it. If you’re counting on survivorship as your estate plan, know that your co-owner can quietly undo it.
Tenancy in Common
Tenancy in common lets two or more people own a property together in shares that can be equal or unequal. Each owner holds a distinct, undivided interest, meaning you don’t own a specific room or corner of the lot but rather a percentage of the whole. A common setup is a 60/40 split reflecting unequal contributions to the purchase price.
The key difference from joint tenancy is that there is no right of survivorship. When a co-owner dies, their share passes to whoever their will or state intestacy law names, not to the other co-owners.1Legal Information Institute. Tenancy in Common Each owner can also sell, gift, or mortgage their share independently, which means you could end up co-owning property with a stranger if your co-owner transfers their interest. For unmarried couples, business partners, and investors who want their share to go to their own families, tenancy in common is usually the right choice.
Tenancy by the Entirety
Tenancy by the entirety is a joint ownership form available only to married couples, and in a handful of jurisdictions to domestic partners or civil union partners. It works like joint tenancy: both spouses own the whole property and when one dies, the other automatically inherits full ownership without probate.2Legal Information Institute. Tenancy by the Entirety
What sets it apart is creditor protection. In states that recognize it, a creditor with a judgment against only one spouse generally cannot force a sale of the property or place a lien on it. The debt has to be owed by both spouses for the property to be at risk. That protection makes tenancy by the entirety especially useful when one spouse runs a business or carries professional liability. Roughly half the states recognize this form, and the details vary. Some limit it to real estate, others extend it to bank accounts and other assets. Unlike joint tenancy, neither spouse can sever a tenancy by the entirety on their own. Both must agree to sell or transfer the property.
Community Property
Nine states treat most assets acquired during a marriage as community property, meaning each spouse owns an equal 50% interest regardless of who earned the money or whose name is on the title.3Internal Revenue Service. IRS Publication 555 – Community Property Property you owned before the marriage, or received as a gift or inheritance during it, generally stays separate.
Community property doesn’t automatically include a right of survivorship. When a spouse dies, their half passes according to their will or state law. It doesn’t automatically go to the surviving spouse unless the couple specifically elected community property with right of survivorship, an option some community property states offer. The big payoff from community property shows up at tax time, and it’s covered below.
Holding Title in a Trust
Transferring property into a trust means a trustee holds legal title for the benefit of the trust’s beneficiaries. In a revocable living trust, the most common type for homeowners, you typically serve as both trustee and beneficiary during your lifetime, keeping full control. The payoff comes at death: property in the trust passes to your named beneficiaries without probate, saving time and keeping the transfer private.
A common worry is that moving property into a trust will trigger the due-on-sale clause in your mortgage and let the lender demand full repayment. Federal law prevents that. Under the Garn-St. Germain Act, a lender cannot accelerate a residential mortgage when you transfer the property into a trust where you remain a beneficiary and keep living in the home.4Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions The same statute protects transfers to a spouse, transfers resulting from a divorce, and transfers upon the death of a co-owner.
Irrevocable trusts work differently. Once you transfer property into an irrevocable trust, you give up the right to change the terms or take the property back. The tradeoff is potential estate tax savings and stronger asset protection. The Garn-St. Germain exemption still applies as long as you remain a beneficiary and keep your right to live in the home.
Holding Title Through an LLC or Other Business Entity
Investors and landlords often hold rental property through a limited liability company or similar entity. The LLC, not the individual, appears on the deed as the legal owner. The main benefit is liability separation. If someone is injured on the property and sues, the lawsuit targets the LLC’s assets rather than your personal bank accounts, home, or retirement funds. That shield holds only if you treat the LLC as a genuinely separate entity, with its own bank account, proper records, and no commingling of personal and business finances.
Holding property in an LLC also makes ownership transfers simpler when multiple investors are involved. Instead of recording a new deed every time someone joins or exits, you transfer membership interests in the LLC. One important catch: most residential lenders won’t lend to an LLC, and transferring a mortgaged personal residence into an LLC may not be protected by the Garn-St. Germain Act the way a trust transfer is, since the statute’s exemptions are specifically limited to trusts, family transfers, and certain other situations.4Office of the Law Revision Counsel. 12 USC 1701j-3 – Preemption of Due-on-Sale Prohibitions Talk to your lender before moving a mortgaged property into an LLC.
How Title Choice Affects Taxes
Vesting on the deed has real tax consequences, and most buyers never think about them until it’s too late to fix cheaply.
The Stepped-Up Basis
When you inherit property, your tax basis for calculating future capital gains is generally the property’s fair market value at the date of the owner’s death, not what the owner originally paid.5Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This stepped-up basis can wipe out decades of appreciation for tax purposes.
How much of the property gets the step-up depends on how title was held. With joint tenancy between spouses, only the deceased spouse’s half is adjusted. If a couple bought a home for $200,000 and it’s worth $600,000 when one spouse dies, the surviving spouse’s new basis is $400,000: the original $100,000 basis on their half plus the $300,000 stepped-up value of the deceased spouse’s half. Sell immediately and the survivor owes capital gains tax on $200,000.
Community property does better. Federal tax law allows both halves of community property to receive a stepped-up basis when one spouse dies, as long as at least half the property is included in the deceased spouse’s estate.3Internal Revenue Service. IRS Publication 555 – Community Property In the same example, the surviving spouse’s basis would be the full $600,000, and they’d owe zero capital gains tax on an immediate sale. That double step-up is one of the biggest financial advantages of community property, and it’s the reason some couples in non-community-property states opt into community property trusts where available.5Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
The Gift Tax Trap of Adding Someone to Your Deed
Adding a non-spouse to your deed, whether a child, a partner, or a sibling, is treated as a gift by the IRS. If you own a home worth $400,000 and add your adult child as a 50% co-owner, you’ve made a $200,000 gift. That exceeds the 2026 annual gift tax exclusion of $19,000 per recipient, so you’d need to file Form 709 and report it.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes You probably won’t owe gift tax right away because the lifetime exemption covers most people, but you’ll use up part of that exemption. Worse, your child takes your original cost basis instead of getting a stepped-up basis at your death. Adding a child to the deed to “avoid probate” often creates a far larger capital gains tax bill down the road than probate would have cost.
A Note on Transfer on Death Deeds
If probate avoidance is the main goal and you don’t want a co-owner, about 32 jurisdictions let you record a transfer on death deed (sometimes called a beneficiary deed) naming who inherits the property when you die. The beneficiary has no ownership interest until your death, so you keep full control, can sell or refinance freely, and can revoke the deed at any time. Most states require the deed to be signed, notarized, and recorded in the county land records before your death. It’s a low-cost alternative to a trust, though it lacks the flexibility and tax planning features a trust can offer.
Changing How You Hold Title Later
Vesting on the deed isn’t permanent. Married couples who took title as joint tenants sometimes switch to community property, where allowed, for the tax advantage. Divorced spouses remove a former partner from the deed. Parents who added a child years ago to avoid probate sometimes discover the gift tax consequences and want to undo the arrangement.
In most cases, changing the vesting means recording a new deed, often a quitclaim deed transferring the interest from the old ownership form to the new one. That sounds simple, but the tax and legal implications can be substantial. Transferring property between spouses is generally tax-free, but adding or removing a non-spouse can trigger gift tax reporting, change the property’s basis for capital gains purposes, or affect eligibility for homestead exemptions.6Internal Revenue Service. Frequently Asked Questions on Gift Taxes Run the plan past a real estate attorney or tax advisor before signing anything. The recording fee is trivial. The downstream consequences of getting it wrong are not.