Home Buying

Title role: How you take ownership of your home could have lasting benefits or implications

What will happen if a co-owner dies? How can you shield yourself from personal liability?

By Robyn A. Friedman -- Globe Correspondent

September 7, 2022

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You’ve signed the purchase agreement. You’ve completed the inspections. You’ve hired a mover. But have you decided how you’ll hold title to your dream home?

Many buyers don’t even think about the name that will go on the deed to their home. But that could lead to unintended consequences, since the name on your deed can have an impact on your liability, taxation, and estate planning, not to mention your ability to transfer or mortgage your home.

“A home is always one of our biggest investments,” said Meghan L. Grugnale, a real estate attorney and partner of Grugnale & Schlesinger in Wakefield. “Depending on what a property owner plans to do with that investment, there are multiple options to consider when they take title in Massachusetts.”

Who will occupy the property? Who wants to control and manage the property? What will happen if a co-owner dies? Who can convey or mortgage the property? How can you shield yourself from personal liability if someone is hurt on the property? These are just a few of the questions you should answer before deciding what names go on the deed.

Here are the more common ways for buyers to take title to a home in Massachusetts:

Individually. If you’re the sole owner, and the deed is in your name, then you hold title individually. This is how most unmarried buyers take title. The owner has the complete authority to sell or mortgage the property. Should the owner die, the property will be conveyed pursuant to the instructions contained in the owner’s will, if there is one, or, if not, pursuant to the laws governing intestate succession.

Tenancy in Common. In this arrangement, two or more individuals hold title to the property jointly — but without a right of survivorship. That means that if one of the owners dies, their portion will go to their heirs, rather than to the surviving owner or owners. “Tenancy in common is best for two partners in a business or two people who are not married and perhaps want their family members to acquire their interest in the property upon their death,” Grugnale said.

Joint Tenancy with Right of Survivorship. Under this arrangement, two or more persons own the property jointly, but if one dies, the property will automatically go to the survivor or survivors without passing to the heirs of the deceased owner or becoming part of their estate.

Tenancy by the Entirety. When a married couple takes title to a home jointly, they will automatically own the property as tenants by the entirety, a special form of ownership reserved for married couples in which the parties are essentially treated as one entity for purpose of legal ownership. This form of ownership is similar to a joint tenancy, because title will automatically vest in the surviving spouse if one dies, without any legal action or need for a will or probate. But it’s different because neither party can convey the home without the consent and participation of the other. That’s why even if a home will be in the sole name of one spouse, the other spouse will be required to sign the mortgage as well.

While most individuals will hold title in one of the ways listed above, high-net-worth individuals, celebrities, or other home buyers seeking privacy often will use trusts or limited liability companies (LLCs) to hold title instead.

“First-time home buyers often don’t take title in a trust, but more-experienced buyers might use a trust or LLC,” said Morgan Franklin, a real estate agent with Coldwell Banker Global Luxury in Boston. “High-net-worth individuals have their accountants and financial managers give them advice on how to structure it.”

Michael W. Merrill, a real estate attorney with Merrill & McGeary in Boston, said that in the 1980s and 1990s, trusts were popular because the beneficiaries are not public record, so that provided the buyers with confidentiality. Today, however, LLCs are popular, Merrill said, particularly with investors and real estate developers, who create individual LLCs to hold title to every property they purchase. “That protects each one from liability,” he said. “It makes sense from a business standpoint.”

If you’re planning to take title in the form of an LLC, be aware that mortgage financing may be hard to come by. “Loans are not able to be sold on the secondary market if the title is held in an LLC,” said Patti Lotane, a mortgage loan officer for Cape Cod 5 in Chatham.

Lotane said that for mortgages that will be held by Cape Cod 5 in its portfolio, there are options for financing a property titled in an LLC. She also said the same challenges don’t affect revocable trusts, which are saleable on the secondary market.

Homeowners insurance is another consideration if you plan to take title in the name of an LLC or other legal entity. According to Spencer M. Houldin, president of Ericson Insurance Advisors in Boston, it’s not uncommon for homeowners to forget to add that entity to their homeowners policy, and any umbrella policies, as an additional insured. That could be disastrous if you’re sued by someone injured on your property, because the entity — and you as the beneficial owner — would not be covered.

Be sure to consult your attorney and financial adviser before closing on your home to confirm that the way you’re taking title is right for you. Remember that title can affect your estate plan, taxes, and even homestead exemptions, so do your due diligence.

Robyn A. Friedman has been writing about real estate and the home market for more than two decades. Follow her @robynafriedman. Send comments to [email protected]. Subscribe to our free real estate newsletter at pages.email.bostonglobe.com/AddressSignUp. Follow us on Twitter @GlobeHomes.