By Harvey S. Jacobs July 24, 2010

Real estate settlements are often shrouded in mystery. There are many moving parts, multiple parties sitting impatiently at the table and piles of documents filled with legal mumbo jumbo.

Even the brightest, most accomplished speed reader would be hard-pressed to read, let alone understand, all of the legal implications of the documents that they are required to sign at settlement. All parties are expected to sign 20 or more documents with assembly-line precision.

Having a basic understanding of all that mumbo jumbo before you pull up a chair at the closing table will help you understand which documents — and which parts of those documents — warrant most of your attention. Today’s column examines the legal implications of the more important documents you will see at settlement.

In essence, a settlement is where the buyer gives the seller money and the seller gives the buyer a deed. The language in that deed has serious consequences, because the deed, in addition to having words that convey the property, also identifies the manner in which the buyer will be holding title to that property.

There are four basic ways to hold title to real property. For a single person, the typical way to hold title is sole ownership. That means that the named individual owns all rights to own, possess, convey, bequeath or encumber the property. Creditors of that sole owner may attach a lien against that property to secure the payment of the judgment.

For a married couple, the strongest form of title is called tenancy by the entirety. Strongest means that the home cannot be reached by the creditors of only one spouse. For example, if the husband is in a car accident, is sued, loses the case and gets a monetary judgment entered against him, that judgment creditor cannot attach [or take] his marital home if it is owned by the tenancy by the entirety.

The sole exception to this asset protection is for liens filed by the Internal Revenue Service. If the IRS has a lien against only one spouse it can attach or go after the marital home and enforce the government’s lien against that marital property.

When one spouse of the entirety dies, the other, by operation of law, becomes the sole owner. Similarly, when tenants by the entirety get divorced, the tenancy is severed and the parties become tenants in common, which I will address shortly.

When two or more people, regardless of marital status, wish to own property together, they can elect to hold title as joint tenants with rights of survivorship or as tenants in common.

The legal implication of a JTWROS is that if one co-owner dies, the surviving co-owner(s) become the owners of the deceased co-owner’s share of the property. So, for example, if there are three siblings who owned a home as JTWROS and one sibling passes away, the surviving two siblings, who each had previously owned a one-third share of the property, would each own a 50 percent share. JTWROS is often used when the co-owners are family members. Because the JTWROS ownership is extinguished upon a person’s death, it cannot be left to someone in a will or otherwise bequeathed.

Inheritance is not restricted using the tenant in common format, which is most often seen in business partnerships. TIC ownership interests can be separately bought, sold and encumbered, assuming you can find someone willing to deal in a fractional interest in a piece of property. TIC ownership can pass to the owner’s estate upon death.

Both JTWROS and TIC interests are subject to creditors’ rights of attachment. Such attachment will only affect the ownership interest of the party against whom the creditor has a judgment.

Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, or ask@theho