Holding Joint Title to Property in California

They say that, in real estate, location is everything. I would argue that “title” counts for at least something.

Thanks to our legal system’s roots in a centuries-old feudal system dating back to the Norman Conquest of England in 1066, the ways in which title can be held are arcane. But if you share ownership rights with someone else (a spouse, a life partner, a family member, or a business partner) working through the complexities can help you avoid the time and expense of probate and pass real estate to your heirs in a tax-efficient manner.

Ways to Hold Joint Title

If you own a house, land, commercial property or other real property yourself, you probably hold title by sole ownership. As the name implies, as the sole owner, you have complete power to control the property without anyone else’s permission.

But things get more complicated when you own property with other people. When you own property jointly, the manner in which you hold title can affect how the property passes upon the death of one of the owners and whether the surviving owners enjoy any tax benefits. (The basic forms of co-ownership are listed in Civil Code section 682.)

Form of title	Survivorship?	What clears title at death	Income tax basis at death
Tenancy in common	No	The share passes under the owner’s will or trust, or to heirs; outside a trust it often needs a court process	New basis on the decedent’s share
Joint tenancy	Yes	Survivors record an affidavit of death of joint tenant	New basis on the decedent’s share
Community property	No	A spousal property petition when it passes to the surviving spouse; otherwise probate or a shortcut	New basis on the whole property
Community property with right of survivorship	Yes	The surviving spouse records an affidavit	New basis on the whole property
Trust	Under the trust’s terms	The successor trustee records an affidavit of death of trustee	Depends on whether the property is community or separate

Tenancy in Common

A tenancy in common creates undivided interests in land that give each co-tenant the right to possess and use the whole property. Each co-tenant can own an equal or different percentage of the property, with corresponding rights to any income and obligations for any debts. Tenancy in common is a common way to own business property or for siblings to share title to an inherited rental or business property.

A co-tenant’s interest is entirely alienable, it can be sold or given away in the same way a sole owner can sell or give away property. When a co-tenant passes away, their interest in the property passes under their will or trust, or to their heirs if they left neither. As a result, absent previous agreements to the contrary, it is possible for your co-tenants to change without notice.

Unless the share is held in a trust, the heirs usually need a court process to take it over: a probate, a Primary Residence Petition if it was the decedent’s home, or a Heggstad petition if the decedent’s trust describes the property but the deed never moved.

Joint Tenancy

A joint tenancy works in a similar manner to a tenancy in common except that all of the joint tenants must share an equal interest in the property and the joint tenants may not pass their interest on to their heirs. Instead, when a joint tenant passes away, their interest is eliminated and title passes to the remaining joint tenants, equally, by operation of law. As a result, no probate is necessary to pass title to the surviving joint tenants. Once an affidavit and proof of death are recorded, title passes to the remaining joint tenants without any further process. (The document is usually called an affidavit of death of joint tenant.)

A joint tenant’s interest in property can be sold, but a sale will dissolve the joint tenancy and convert it into a tenancy in common, eliminating the right to survivorship.

The value of joint tenancy property is generally included in a decedent’s estate, to the extent that the decedent contributed to the purchase or maintenance of the property. But, if such amounts cannot be sufficiently proven, the entire value of the property can be included in the estate of the first joint tenant to die. Between spouses, half the value is included regardless of who paid (26 U.S.C. § 2040(b)), and only that half gets a new income tax basis.

Community Property

Most married couples own their joint property as “community property.” Each spouse has an equal right to half of any property owned as community property. Each spouse’s community property interest can be passed by will to anyone the spouse chooses, although real property generally cannot be sold or mortgaged without both spouses joining. But neither spouse may sell or pass the other’s community property interest.

When a spouse dies, community property that passes to the surviving spouse, by will or because there is no will, does not need a probate (Prob. Code, § 13500). The surviving spouse can confirm title through a spousal property petition (§ 13650), a single court hearing. The deceased spouse’s half that passes to someone else, such as children from an earlier marriage, may need a probate.

Community property also has a significant tax advantage: at the first spouse’s death, both halves get a new income tax basis equal to market value (26 U.S.C. § 1014(b)(6)), which can wipe out the capital gain on a home owned for decades. See Community Property and Estate Taxes.

Community Property with a Right of Survivorship

In California, a married couple can elect to hold their real property as community property “with a right of survivorship.” This method of holding title allows a married couple to enjoy the joint ownership right created by community property and avoid probate upon the death of the first spouse. With a right of survivorship, just like a joint tenancy, title to the property passes to the surviving spouse automatically, by operation of law, without the need for any formal court process. (Civ. Code, § 682.1.)

Community Property with a right of survivorship can be a powerful tool for married couples. Critically, it avoids the costs of probate and trust administration. For couples whose only substantial asset is their home, this form of ownership can be key to keeping their estate plan tight and manageable. But couples with larger estates should consider creating a trust.

Trust

Holding property in trust allows owners to avoid probate and retain the ability to elect who inherits their interest in property. When title is held through a trust, legal title to the property is held by the named trustee(s), who is/are required to put the property to use for the named beneficiaries as identified in the trust. In most cases, couples who own property through a trust will name themselves as the trustees and beneficiaries, maintaining practical control of the property while taking advantage of the flexibility that trusts create. In particular, trusts allow property owners to designate who should receive property after their death. As with a right of survivorship, property inherited through a trust does not have to pass through probate. But unlike a joint tenancy or community property with a right of survivorship, the ownership interest can pass to anyone that the decedent has identified in the trust documents.

When the deed never matched the plan

Most title problems we see after a death come from a deed that never caught up with the plan: a house the trust lists but the owners never deeded to it, a refinance that took title out of the trust, or a joint tenancy that left a share to someone who has since died. A Heggstad petition confirms that property described in a trust belongs to it; a Primary Residence Petition can transfer a home worth $750,000 or less without a full probate; and probate handles the rest.

Contact the Law Office of Ravi Patel if a co-owner has died and title needs to be cleared.