Real Estate – All Things Real Estate: There are several legal ways to hold title to property

Real Estate

Real Estate – All Things Real Estate: There are several legal ways to hold title to property

Real Estate – All Things Real Estate: There are several legal ways to hold title to property



REal Estate – Q: My fiancée and I are getting married in October, but it looks like the house we’re buying together will close several weeks before that. Our Realtor asked us if we knew how we wanted to hold title. She said she mentioned it because the escrow officer is going to need to know so she wanted us to have time to research it. Well, we’ve tried. And now we’re totally confused. Can you help?

A: This is one of those columns in which I can both definitely help you while having to urge you not to take any advice I give below.

How people take legal title to their property is typically pretty straight forward, but having said that, can be deceptively complicated due the many nuances in the law. Because I don’t know any particulars about you and your betrothed, your financial situation, who’s contributing what money to the purchase, what your tax situation looks like, and a dozen other things, I really can’t give you any advice you should follow. That would be better given by your accountant or attorney after knowing more about your particular situation.

Having said that, let’s do a flyover of the legal lay-of-the-land with regard to the methods for holding title to real estate in California.

Someone who buys a piece of property in California simply owns it. That’s it. There is no “method” of holding title. You just own it.

The complications start when you and other people also own it.

The most common co-ownership methods of holding real estate are: Tenants-in-Common (by far the most common method), Joint Tenancy, and Community Property with Rights of Survivorship (a relatively new method).

Tenants-in-common is the default method for two or more people to hold title to a piece of property. In many ways it’s the most flexible method of holding property.

The co-owners of a piece of property can own different percentages from each other. For example, one co-owner may have a 10 percent interest while another co-owner may have a 90 percent interest.

Each co-owner is typically free to sell their interest in the property to a third-party without the permission of any of the other co-owners. In California, if a deed doesn’t specify otherwise, co-owners of a piece of property will be presumed to be tenants-in-common.

However, I’m presuming from the fact that you and your significant other are already planning to get married, having an unequal ownership interest, or having the freedom for either one of you to sell your interest is not in your plans.

Probably the second most common method, at least historically, for people to hold title is as joint tenants. One of the basic hallmarks of joint tenancy is that when one of the joint tenants dies, the other joint tenants automatically split the dead owner’s interest. It’s called a right of survivorship.

Historically, and by “historically” I mean over the past 1,500 years, joint tenancy was used to ensure that the oldest son would inherit the land after the parents die. For married couples, joint tenancy was very common over the past 30 years or so. It was an easy way to be sure your spouse would inherit the house and not have to split the inheritance with the children. There were also some potential tax advantages, which have been mostly eliminated by the advent of other methods.

But there are a number of pitfalls to holding title as joint tenants. For example, if unmarried people hold title as joint tenants, their heirs will not inherit their interest. Additionally, if one of the owners put a lot of money down on the property, the court may view it as a gift to the other owner should the co-owners find themselves in a lawsuit to force the sale of the property.

Married couples can hold property as community property in California. Without getting into the weeds on this one, there have historically been a number of nagging reasons why they would choose not to do so.

For that reason, about 18 years ago the California Legislature added a new type of deed called Community Property with Right of Survivorship. In short, it fixed most of the problems with holding title as community property and is now the preferred way for most married couples to hold joint title to their property.

However, for you two, if you’re going to close on the property prior to getting married, you can’t hold title as community property, at least not yet. So you’re going to have to choose between tenants-in-common and joint tenants. Then, as soon as you get married, feel free to go down to the Recorder’s Office and record a new deed that gives the two of you title as community property with right of survivorship.

Frankly, without knowing any more about your situation, you are probably going to seriously want to think about holding title as tenants-in-common. I’m certainly not trying to spoil the happy occasion, but just in case your bride leaves you at the altar it will be much easier to untangle your ownership interests that way.

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