Q: My fiancé and I are buying a house. Escrow is going to close a few months before our wedding. We’re confused about how to take title — as unmarried man and woman or as registered domestic partners? Also, we’re pretty sure we’re either joint tenants or tenants-in-common, but we’re not sure which.
A: Congratulations on both your house and your upcoming nuptials! Becoming a homeowner and becoming a spouse are two very major life transitions to experience at nearly the same time. Traditionally, people became husband and wife before becoming homeowners; these days, though, more and more couples are choosing the same route as you and buying their home first.
It sounds like you might have managed to buy in time to collect the homebuyer’s credit. Hopefully that will ease some of the check-writing pain that comes with buying a house and getting married at the same time.
Mindset Management
As with getting married, co-buying a home creates opportunities to have sometimes unpleasant, but necessary, conversations. Specifically, to determine which legal form of title to elect for, you’ll need to have a conversation around how you want to manage your marital finances and what you each want to happen with your possessions when you pass away.
Some people have these sorts of conversations with their partner with no sweat. For others, it can be excruciating. However, they are necessary for everyone — money is frequently cited in studies as the No. 1 cause of divorce, probably because most people don’t have clear conversations about it up front, and end up with a situation that works for no one.
You need to know whether you two will merge all your finances, keep them separate, or have some hybrid arrangement. You need to know whether you plan to own the home and the bills that go with it on a 50/50 basis, or in some other proportion. The form of title vesting you select will be driven by your joint answers to these questions.
If you struggle with initiating this conversation, grab a copy of "Get Financially Naked: How to Talk Money with Your Honey" by Sharon Kedar and Manisha Thakor (Adams Media, 2009) — it’ll help you get clear on how you want things to be, and then help you develop a level of comfort around having this conversation with your fiancé.
Need-to-Knows
Well, your first question is quite simple — you either completed the process of being registered with your state as domestic partners or not. The documents do not request to know whether you live together or are engaged to be married, but whether you actually formally registered as domestic partners.
The real estate and mortgage implications of being registered vary from state to state. For example, in some states, domestic partners can acquire community property with rights of survivorship, so that if one partner dies, the other automatically inherits their interest in the property. Also, in many states, when one domestic partner takes on a debt, it can become a community debt, creating an obligation on the part of the other partner. …CONTINUED
However, the implications of domestic partnership are not the issue here so much as accurately recording on your transactional documents and loan documents whether or not you are, in fact, registered. That should drive the marital status description you elect.
Be aware that you can and should get back in touch with your title and escrow provider after the wedding to change the legal description of your marital status and of your title format, as needed. Until that time, though, you need to select a form of title that will reflect your intentions for your co-ownership of the property up until the wedding.
Let’s go from simple to complex. If your intention is to create a standard, community property-esque situation in which you own the home 50/50, have joint responsibility for the mortgage and other costs of ownership, and each want the other to inherit their share of the home without going through probate in the unlikely event one of you passes away before the wedding, your best bet is a joint tenancy with the right of survivorship.
However, joint tenancies offer only 50/50 ownership and obligation; if you plan to own the property in any other proportion than that (e.g., 60/40, etc.), then you must elect a tenancy-in-common. Tenancies-in-common are extremely flexible, though — all the rights and responsibilities of the co-owners are open for negotiation. For this reason, if you elect a tenancy-in-common, you also need to work with an attorney to draft a tenancy-in-common agreement, which may cost you a couple thousand dollars.
If you each would want your parents, children or other heirs to receive your share of the property, but you’d still like to own it 50/50, consider a joint tenancy without the right of survivorship and a revocable living trust that expressly states how you want your assets transferred when you pass away.
Action Plan
In fact, no matter what form of title vesting you elect, taking the steps of getting married and buying a home are, individually, sufficient to justify the expense of a visit to an estate planner. Doing both means you have double the reason to go!
Most estate planners will recommend that — no matter how your title is vested — you transfer your new home into a revocable living trust and create an estate plan that works for both of you. Yes, you’ll have to have some uncomfortable money conversations, but you’ll sleep easy at night knowing that your interests and your mate are protected from the exorbitant costs and delays of probate and the unintentional complications of winding up co-owning your home with your parents, for example.
If I were you, I’d talk with the estate planner before escrow closes to determine how you want to vest title and put a sensible estate plan in place.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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