FOUR WAYS TO HOLD TITLE IN HAWAII
Posted March 13, 2006

Dear Joan:

 My wife and I have bought a number of homes in California and have always held them as “Tenancy in Common.” We are now realizing a long-held dream and purchasing a second home in Hawaii and have been told about another choice called “Tenancy by the Entirety.” Can you explain the differences in these two ways of holding property and let me know if there are additional choices.

 Signed,

California Dreaming

 Dear California:

 I love calling people by the name of a state. When I was a little girl I watched a lot of cowboy movies on Saturday morning television, and I was always jealous that my name wasn’t “Montana,” or “Texas.” But, enough of that—yes, you are correct, each state has different selections of ways to hold title to real property. California is a Community Property state and your choices there are: Tenancy in Common, Joint Tenancy, Community Property and Community Property with Right of Survivorship.

 In Hawaii we have four different ways to hold title. I’ll give you some information on each of them to help you make an informed decision as to which one is best for you. As always, when making this type of decision, I recommend that you consult your attorney and/or CPA. That’s what we always say in the column business, but it really is good advice to follow.

 Severalty: This is for an individual who is purchasing a property. It is the only choice available for an individual, even if they are putting the property into a trust. The property will pass to the owner’s heirs upon death.

 Joint Tenancy: This ownership is between two or more persons, with equal shares of ownership, such as two people each having 50% ownership or three people, each having 1/3 ownership. Upon the death of one of the individuals, their share of the property goes directly to the surviving individuals equally. With Joint Tenancy the property passes to the other individuals without having to go through probate.

 Tenants by the Entirety: This is a form of joint tenancy with survivorship, primarily for married couples. It is also available for parties with a registered reciprocal beneficiary relationship. Upon death, the property goes directly to the surviving individual, avoiding probate. With the exception of a child support judgment, one of the features of this tenancy is that a judgment against one of the owners will not attach unless the tenancy is broken.

 Tenancy in Common: This tenancy is for two or more persons. The ownership does not need to be equal; as an example three people may own the property, with the first person owning 20%, a second person owning 30% and a third person owning the remaining 50%. There is no limit to the number of owners.

 One of the other features that distinguish Tenancy in Common from Joint Tenancy is that there is no right of survivorship. Upon the death of one of the owners, the property goes to that owner’s heir through the probate process.

 Many people have set up trusts and want to have their property put into their trusts. In this situation you want to let your Realtor and Escrow Officer know your specific wishes when you open escrow. They will work with you to get the documentation needed to have an attorney draw up your deed in the name of the trust.

 One last thing I want to mention is that when purchasing a property using a 1031 Exchange you still need to select the title and tenancy that you wish. When the exchange is completed the property will then be held according to one of the four above options.

 Other than that, keep your powder dry and enjoy your new home—Yours truly, “Montana.”

Reprinted from The Maui News .