Bare Legal Title


Lawyers representing those filing bankruptcy often encounter clients who claim ownership of property that they did not contribute towards, which means it becomes part of their estate and can be subject to sale by a trustee.

Contracts require consideration to be legally enforceable. Otherwise, they will be invalid and rendered null and void.

What is the bare legal title?

Bare legal title property ownership grants its owner the ability to sell or transfer the asset but doesn’t grant them the ability to enjoy using or enjoying it themselves – in contrast with joint tenancy or tenancy in common, where multiple owners share equal rights in using and enjoying it.

Furthermore, when purchasing or transferring property that does not involve living or working on it – such as rental properties or commercial real estate – its bare legal title holder may be required to pay taxes and insurance on it. This typically occurs when selling it off as rental real estate or commercial real estate.

One instance of bare legal title occurs when an asset is pledged as collateral against a loan; in such a situation, the lender has a lien on it while the borrower still retains possession and control over their possessions – this process is known as mortgage hypothecation and often leads to trust being established as a result.

There can be numerous other reasons for choosing to hold bare legal title of property. Doing so can help avoid some of the issues associated with joint ownership, such as who gets to use or enjoy the property, while it may also assist in financing transactions and tax deferral or exemption opportunities.

Being the owner of an asset through legal title ownership can protect it from bankruptcy. When someone owns their support without legal title, their trustee has no interest in selling it as they don’t stand to benefit from it themselves.

However, it’s essential to keep in mind that holding legal title alone does not offer complete protection from trustee sales in bankruptcy proceedings. Other factors may impact whether an asset can be exempted from sale in bankruptcy proceedings, such as holding it in trust for someone else with access rights and enjoyment rights over it. Before making this decision, it would be prudent to consult an experienced bankruptcy lawyer about your options.

What are the advantages of the bare legal title?

Holding assets without legal title can be an effective way of minimizing tax liabilities, particularly if they’re subject to valid liens or mortgages that will need satisfying upon the sale of the asset; in that way, the owner won’t lose any rights associated with either selling it or owning it directly.

The bare legal title may also help to reduce gift or inheritance taxes. When donating property in this way, once its usufruct period ends, the recipient will acquire full ownership rights to it, and you could save tax by doing this if its value will likely not increase substantially over time.

However, there can be disadvantages associated with using bare legal titles. If you own an asset under such legal title and then file for bankruptcy, preventing the trustee from selling that help may prove challenging as they will likely find evidence that shows you did not contribute any funds towards its purchase or maintenance.

Another possible drawback of bare legal title ownership is its inability to grant you any access rights for the use of your asset, which can present issues if it becomes necessary for personal reasons like illness.

Suppose an asset you hold legal title to is also subject to an existing lien or mortgage. In that case, the trustee may be less inclined to sell it as this would constitute a breach of fiduciary duty and could lead to the potential loss of assets for you.

One example is when a parent co-signs a loan for their child to purchase a car; when filing bankruptcy, however, the parent could argue they only held “bare legal title” because they made no financial contributions toward its purchase or maintenance. Experienced bankruptcy attorneys can carefully analyze this theory of having assets bear legal title before including them on client schedules with statements to this effect.

What are the disadvantages of bare legal title?

If someone holds legal title to an asset but fails to contribute or benefit from it in any way, they could lose the ability to enjoy it. For instance, if a parent transfers property as a gift, but their adult children never pay or reside in it and contribute nothing towards its value or upkeep, they could be considered holding only legal title – although this doesn’t preclude them from enjoying other aspects of it such as selling it or using it as collateral for loans.

The bare legal title can also be an inherently risky method of holding property if its purpose is to facilitate tax evasion or avoidance. Mortgage hypothecation is one form of this practice: this happens when a borrower pledges their property as collateral against a loan, keeping possession and control while giving their lender security interests over it – should the borrower default, the lender will be able to seize back possession and control.

The bare legal title makes establishing beneficial ownership difficult, which may create issues in bankruptcy proceedings when trustees attempt to seize property belonging to both trustees. Bankruptcy attorneys frequently face this situation when clients own real estate “jointly with” their parents with only the goal of protecting themselves in case of bankruptcy proceedings.

Bare legal title can also be an invaluable asset when used for estate planning purposes. A person can create a bare trust to hold onto legal title to their property for future generations and reduce gift and inheritance taxes by having no value assessed on the title held by a bare trustee at the creation of the trust. However, it should be noted that beneficiaries cannot serve as trustees and that legal title will only be conveyed upon request from beneficial owners.

How can I get the bare legal title?

One way of obtaining legal title to property is through purchasing it from someone who already possesses it. For instance, parents might transfer their home as part of an estate-planning strategy to one of their adult children, who then lives there and pays expenses such as maintenance, insurance premiums and taxes – in return, this child could claim full legal ownership to it.

Similar situations arise when someone owns a vehicle without actually being its true legal owner; yet the person paying for and driving it regularly derives significant benefit from owning it. When this occurs, a trust can be created giving legal title to one individual while making them the true equitable owner of it.

There may also be situations in which holding bare legal title may help shield assets from creditors. For instance, if a debtor has legal title to an asset subject to a valid lien or mortgage agreement but there’s also an outstanding lien or mortgage on that same asset from third parties, their trustee might be less inclined to sell that asset in order to pay creditors.

The bare legal title may also offer benefits in certain tax situations. For instance, when an elderly person transfers their home to one of their children with usufruct in place, that child has the option to use or rent it until their life expires while still keeping full ownership with no costs or liabilities attached to it. At its conclusion, full ownership automatically returns to its rightful owner without charges or penalties incurred as part of this arrangement.

At Avocat Herve Blatry, we know bare legal title can be beneficial, but before investing, it is vitally important that you seek professional legal and tax advice prior to any such arrangement. Let us assist in understanding your options for dealing with debt and recovering from bankruptcy by scheduling a complimentary consultation – our experts can evaluate assets, negotiate with creditors, and create a strategy plan to manage finances during and post-bankruptcy. Reach out today and schedule your free appointment so we can evaluate and negotiate on your behalf!