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How Should I Hold Title to My Home

If you are a homeowner in California, you may not be aware that there are different ways to hold title to your home. ‘Title’ means how you own your real property and that phraseology can usually be found in the language on your deed.  How you hold title may have different legal effects while you are alive as well as when you die.  Let’s take a look at the contrasting ways one can hold title to real property in California.

Sole Ownership: If someone is single, his or her deed may say that the property is owned “as a single person.” This is a typical ownership position for a single man or woman. When the owner passes away and has no will or trust, in all likelihood the estate will be probated. [Note as of January 2016 in California a single person can now fill out and file a transfer on death deed that will transfer the property at death to another designated person outside of probate.]

 Joint Tenancy With Right of Survivorship: This type of ownership means that if two persons own a property as joint tenants, then when one of them dies, the other will own the property 100% as a matter of law outside probate or a will or trust. One drawback to this type of ownership is that one joint tenant can sell or give his/her interest to another without permission of the other joint tenant.

Community Property With Right of Survivorship: California is a community property state, which means that couples can hold title this way to their real property. When one spouse dies, the other spouse will inherit the property unless the deceased spouse has willed his or her one-half share to someone else. One perk to this form of title is that community property assets going to a surviving spouse receive a new stepped-up basis at market value on the date of death.

Tenants in Common: Two or more persons can hold title to a property as ‘tenants in common.’ That means that each tenant in common owns a percentage (50%, 30%, etc.) and that percentage will be specified on the deed. This type of title is popular for two or more persons who are not married to each other, two or more investors, or else an older person in a second marriage that wants to leave their portion to an heir. When a person dies owning property as a tenant in common, that portion of their real estate will likely be probated in the absence of a will or trust. A tenant in common can leave their portion in a will or trust or even sell it before death. One disadvantage to this type of ownership is that one tenant can bring a partition action to force a sale of the property.

Living Trust: Persons and couples can hold title to real property in a revocable living trust (after they have transferred ‘title’ to the property to the trust). Many observers believe that this is one of the best ways to hold title to real estate in California since it avoids court, probate and their attendant costs. There are many other advantages of holding title to real property this way. If one spouse becomes incompetent, the other will manage the asset. When a trustor dies, the property passes seamlessly to the designated beneficiary according to the trust’s dictates. A living trust is also private so details never become known except to the trustors, trustees and beneficiaries. Valid living trusts, also, are rarely challenged in court.

While living trusts appear to offer the most advantageous form of real property ownership in California, it is wise to consult an experienced estate-planning attorney to discuss various options. Your estate planning counsel can discuss in detail the various forms of real property ownership and the pros and cons of each.

Sometimes folks think that they should own all their property, real and otherwise, in joint tenancy, but there may be sufficient legal reasons why this may not be a good idea for certain assets or situations. Again, seeking out experienced estate planning counsel is a wise idea.