A thorough and comprehensive estate plan will make use of a wide range of estate planning tools and strategies in order to meet the needs of the plan’s creator. For example, if your goal is to pass your assets to loved ones as quickly and simply as possible after your death, probate avoidance tools and strategies should be incorporated into your estate plan. One of those strategies focuses on how you title property. We’ll explain how joint ownership can help avoid probate.
Joint Ownership in California
When two or more people jointly own property, the manner in which they choose to hold the title to that property is significant for several reasons. Among the most important of those is that the type of joint ownership determines what happens to a co-owner’s interest in the property upon his/her death. In the State of California, title to real property held by co-owners may be held in the following ways:
- Tenancy in Common – a tenancy in common may be created by two or more persons or entities. Marriage is not required to own property as tenants in common. Ownership may be divided into equal or unequal shares; however, the law will assume they are equal unless otherwise specified. Each owner may transfer, convey, or encumber their interest separately without consent of the other owners. This aspect of a tenancy in common is important to remember as it means that your co-owner could sell his/her interest to anyone. More importantly, your co-owner could cause a lien to be placed against the property or could use his/her share in the property as collateral for a loan. Fortunately, unless the owners are married, or are registered domestic partners, a co-owner’s interest is not subject to liens of another owner; however, a forced sale could occur. Upon the death of one owner, that owner’s interest passes to beneficiaries or heirs during probate, meaning it does not pass automatically as is the case with other types of joint ownership. Tenancy in common is the default type of joint ownership in California, meaning if the title documents fail to specify the type of joint ownership a tenancy in common is created.
- Joint Tenancy – a joint tenancy may be created by two or more persons or entities. Marriage is not required to create a joint tenancy. Ownership interests are equal and the ownership document must specify joint tenancy. Each owner may transfer his/her interest separately but if one owner transfers his/her interest is results in a tenancy in common after the transfer. A co-owner’s interest is not subject to liens of another owner; however, a forced sale could occur if prior to co-owner’s death. Upon the death of one co-owner, that owner’s interest automatically passes to other owners through “right of survivorship”
- Community Property with Rights of Survivorship – for this type of joint title to be created the co-owners must also be spouses or registered domestic partners. Ownership shares are equal and both owners must consent to transfer or encumber the property. The entire property may be subject to a forced sale to satisfy the debt of either spouse or domestic partner. Upon the death of one owner, the owner’s half interest automatically passes to the spouse or domestic partner through rights of survivorship.
Please download our FREE estate planning checklist. If you have additional questions or concerns about how joint ownership can help avoid probate, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.
- 3 Potential Trustee Pitfalls - December 9, 2022
- Joint Tenancy: Watch Out for the Perils – Part 2 of 2 - December 7, 2022
- Joint Tenancy: Watch Out for the Perils – Part 1 of 2 - December 5, 2022