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November 1, 2018

How to Hold Title

How to hold title, here's the scenario...

The Last Minute Title Issue

The transaction is almost complete. The broker has found a ready, willing, and able buyer at the listing terms. All the provisions of the standard PURCHASE AND SALE AGREEMENT are determined, and all special protective conditions have been inserted. Just one more blank to fill in TITLE SHALL VEST AS FOLLOWS. Suddenly there is an issue.

The buyer says "I don't know much about taking title or ownership of real property, but I do know that I want my wife Susan to get this house when I die." The broker recommends that the husband and wife take the title as joint tenants since this will achieve the desired result of the surviving spouse obtaining title to the entire property immediately upon the other's death (and also avoid probate). With no further discussion of the consequences of this act, the buyer directs the broker to fill in the blank with the words "Joint Tenancy."

The Major Problems

There are two major problems in the above situation. First, a broker who recommends how a buyer should hold title to property may be guilty of the unauthorized practice of law. The broker does have a responsibility to advise the buyer of the principal features of the various forms of ownership. Beyond that, however, the broker can only recommend that the buyer consult an experienced tax advisor, such as an attorney or accountant. Second, in many cases, holding title jointly can create serious tax disadvantages which could be avoided with proper tax counseling and estate planning directs the broker to fill in the blank with the words "Joint Tenancy."

There are two major problems in the above situation. First, a broker who recommends how a buyer should hold title to property may be guilty of the unauthorized practice of law. The broker does have a responsibility to advise the buyer of the principal features of the various forms of ownership. Beyond that, however, the broker can only recommend that the buyer consult an experienced tax advisor, such as an attorney or accountant. Second, in many cases, holding title jointly can create serious tax disadvantages which could be avoided with proper tax counseling and estate planning.

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