THE DELEON INSIGHT
FUNDAMENTALS OF HOLDING TITLE WITH MULTIPLE OWNERS By Alexander J. Lewicki, Esq.
A question that buyers often ask prior to a home purchase is, how should we hold title? Exploring the various forms of title can save your family time and money, making it worthwhile to become knowledgeable about the basics before you are in contract on your next home. Of course, there is much more to know about holding title than what is outlined below. Each family has a unique set of circumstances that will determine what method is most appropriate for them. California law recognizes several traditional ways to hold title among multiple owners. Property can be held as tenants in common, joint tenants, community property, community property with a right of survivorship, and through an entity, such as a corporation, Limited Liability Company (“LLC”) or partnership. Tenancy in common is the default method of co-ownership in California. To have a tenancy in common, all that is required is that all owners take an equal right of possession in the property. One of the primary benefits of a tenancy in common is that co-owners can possess unequal shares of interest in the property. Property held as tenants in common is also freely transferable among separate owners. Upon the death of one tenant in common, the ownership interest will be passed on to their heirs through probate. A joint tenancy is a method of co-ownership defined by the right of survivorship, whereby upon the death of one owner the property transfers to the surviving tenant while avoiding probate. To have a joint tenancy, all owners must take interest under the same title document, at the same time, possess ownership in undivided equal shares, and have an equal right to possess the whole property. An absence of one
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of these unities (i.e., by one owner’s conveyance outside of death) automatically severs the joint tenancy and creates a tenancy in common. A joint tenancy is often favored where several people, or a non-married couple, want to take equal interest in a property while avoiding probate. Although community property with rights of survivorship (discussed below) offers significant tax advantages, some married couples may prefer tenancy in common due to the possibility of enhanced liability/ creditor protection. Community property is a method of holding title restricted to married couples and registered domestic partners. In California, property acquired during a marriage is presumed community property and the interests of each spouse in such property are equal. While community property can only be transferred with consent of both spouses, each spouse is able to will away their ownership interest freely. Community property does not avoid probate upon the death of one spouse. A second, arguably more beneficial type of community property is community property with a right of survivorship. Community property with a right of survivorship combines many of the features of joint tenancy and community property. It avoids probate, creates a non-transferable equal interest in property, and garners certain tax benefits specific to community property (i.e., a full step-up in basis of the entire property value for the surviving spouse). Another method of co-ownership is via a partnership, defined as an association of two or more people conducting a business for profit. Property acquired by a partnership is property of the partnership and not of the partners individually. This method is generally considered the simplest manner of
