Individuals, in either Sole Ownership or Co-Ownership. may hold title to real property in California Co- Ownership of real property occurs when two or more persons hold title. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference eight of the more common examples of Sole Ownership and Co-Ownership.
1. A Single Man/Woman: A man or woman who is not legally married. Example: John Doe, a single man.
2. An Unmarried Man/Woman: a man or woman, who, having been married, is legally divorced, Example: John Doe, an unmarried man.
3. A Married Man/Woman, as His/Her Sole and Separate Property: When a married man or woman wishes to acquire title in his/her name alone, the spouse must consent, by quitclaim deed or otherwise, to the transfer, thereby relinquishing all right, title and interest in the property. Example: John Doe, a married man, as his sole and separate property.
4. Community Property with Right of Surviorship:
Effective July 1, 2001, a new law (CCC682.I) will allow married couples residing in California to hold and vest title to real and personal property as "Community Property with Right of Surviorship". This form of holding title is probably most consistent with what spouses believe they currently have. Under current law, if a married couple holds title as "community property", upon the death of a spouse, one-half or the community property passes to the surviving spouse and the other half belongs to the decedent's estate. As a result, there are federal tax advantages to holding property as "Community Property". If the couple holds title as "Joint Tenants with Right of Survivorship", the expense of administrating an estate through the probate court is avoided, but the tax advantage of community property is also jeopardized. Often, in order to avoid this adverse tax impact, the surviving spouse will engage the services of legal counsel to seek a probate court decree that joint tenancy property was in fact community property: however, the IRS has questioned the effectiveness of such decrees (See Estate of Young v. Commission, 110 T.C. No. 24, 1998)
With the new method of holding title, "Community Property with Right of Survivorship", married couples residing in California will get the best of both worlds. Property owners will be able to avoid the costs and delays of probate while ensuring that the surviving spouse will receive the favorable tax status of community property under federal tax law. Example: John Doe & Mary Doe, husband and wife, as community property with right of survivorship.
5. Community Property:
The California Civil Code defines community property as the property acquired by husband and wife, or either, during marriage. When not acquired as the Separate property of either. Real property conveyed to a married man or woman is presumed to be Community property,
Both spouses have the right to dispose of one half of
the community property by will, but if there is no will,
all of the property will go to the surviving spouse
without administration. If a spouse exercises his/her
right to dispose of one-half, that half is subject to
administration in the estate.
Example: John Doe & Mary Doe, husband and wife, as
Example: John Doe fit Mary Doe, husband and wife.
Example: John Doe, a married man.
6. Joint Tenancy:
A Joint tenancy estate is defined in the Civil Code as follows: "A joint interest is one owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy". A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property immediately vests in the surviving joint tenant(s). As a consequence, joint tenancy property is not subject to disposition by will. Examples: John Doe & Mary, Doe, husband and wife, as joint tenants.
7. Tenancy in Common:
Under tenancy in common, the co-owners own undivided interests, but unlike joint tenancy, these interest need not be equal in quantity of duration, and may arrive at different times. There is no right of survivorship; each tenant owns an interest, which, on his/her death, vests in his/her heirs or devisees. Example: John Doe, a single man, as to an undivided 3/4ths interest, and George Smith, a single mans, as to undivided 1 /4th interest, as tenants in common.
Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the benefit of the trustor/beneficiary, who retains all of the management rights and responsibilities.
The preceding summaries are a few of the more common ways to take title to real property in California and are provided for informational purposes only. For a more comprehensive understanding of the legal/tax consequences, appropriate consultation is recommended. There may be significant tax/legal consequences as to the manner in which title is held. We strongly suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.
(There may be charges associated with these services)