You may eventually choose to co-own real estate with your partner in business, your spouse, your adult child, or another person. If this is the case, it is imperative that you properly title the property because it will affect multiple significant aspects of your life depending on how jointly owned property is titled. The Los Angeles estate planning lawyers at Schomer Law Group, APC go into detail about the various kinds of joint ownership that exist in California.
Buying a property with someone else can be an exciting step, but it’s crucial to understand the different forms of joint ownership available in California to ensure your interests are protected. This guide delves into the various types of co-ownership, their implications, and key considerations before taking the plunge.
Unveiling the Types of Joint Ownership in California:
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Tenancy in Common: This is the default form of co-ownership, where individuals can own unequal shares and independently sell or encumber their interest without the consent of other owners. However, upon death, the deceased’s interest passes through their estate, not automatically to the surviving co-owners.
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Joint Tenancy: This form requires equal ownership shares and a clear declaration of joint tenancy in the conveyance document. A key feature is the “right of survivorship,” where the deceased’s interest automatically transfers to the surviving joint tenant(s).
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Partnership: Here, the property belongs to the partnership entity, not the individual partners. This means partners don’t hold individual ownership interests but rather share ownership through the partnership.
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Community Property: This applies to married couples or registered domestic partners who acquire property while domiciled in California, unless explicitly designated as “joint tenants” or “tenants in common.” Both partners have equal interests and management rights with a fiduciary duty to act in good faith towards each other.
Understanding the Implications of Each Form:
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Tenancy in Common: Offers flexibility in ownership shares and independent sale/encumbrance, but lacks automatic survivorship and exposes the property to potential claims from individual owners’ creditors.
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Joint Tenancy: Offers equal rights and automatic survivorship, but limits individual encumbrances and sales, and exposes the property to possible claims from creditors of joint tenants.
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Partnership: Offers flexibility in management and liability, but requires adherence to partnership agreements and potential tax implications.
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Community property protects spouses and partners’ equal rights and management, but it also leaves the property open to possible claims from each partner’s creditors.
Key Considerations Before Buying Jointly:
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Financial objectives and risk tolerance: Ascertain your personal financial objectives and risk tolerance to select the option that best suits your requirements.
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Estate planning: Consider how each form impacts estate planning and potential tax implications.
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Open communication and mutual trust are essential for cooperative ownership decision-making and conflict resolution.
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Written agreement: A well-drafted written agreement can clarify rights, responsibilities, and dispute resolution mechanisms, even if the default rules apply.
Seeking Expert Guidance:
Navigating the intricacies of joint ownership can be complex. Consulting an experienced real estate attorney is highly recommended to ensure you understand the implications of each form and choose the one that best suits your individual circumstances.
Frequently Asked Questions (FAQs):
Q: Can I change the type of joint ownership after purchasing the property?
A: Yes, it is possible to change the type of joint ownership through a legal process called “partition” or by creating a new deed with the desired ownership structure. However, it’s crucial to involve all co-owners and seek legal guidance to ensure a smooth transition.
Q: What happens if a co-owner wants to sell their interest?
A: Depending on the type of joint ownership, the co-owner can sell their interest to a third party or offer it to the other co-owners first. In a tenancy in common, the new owner becomes a co-owner with the remaining owners. In a joint tenancy, the remaining joint tenant(s) would automatically acquire the deceased’s interest.
Q: What are the tax implications of joint ownership?
A: The tax implications vary depending on the type of joint ownership and the individual circumstances of the co-owners. It’s advisable to consult a tax professional for specific guidance.
Additional Resources:
- California Courts – Tenancy in Common: https://www.courts.ca.gov/selfhelp-smallclaims/familyandrelationships/tenancyincommon.htm
- Nolo – Joint Tenancy in California: https://www.nolo.com/legal-encyclopedia/joint-tenancy-california.html
- FindLaw – California Community Property Laws: https://www.findlaw.com/realestate/landlord-tenant-law/california-community-property-laws.html
Disclaimer:
This guide provides general information about joint ownership in California and is not intended as legal advice. It’s essential to consult with a qualified real estate attorney for specific guidance tailored to your individual circumstances.
Co-Owning Property in California
State law governs joint ownership of real property, meaning each state may offer different types of joint ownership. In the state of California, co-owners may hold title to real estate in the following ways:
- Tenancy in Common. A tenancy in common can be established by two or more individuals or organizations. Tenants in common do not need to be married in order to own property. Ownership may be divided into equal or unequal shares, but unless otherwise stated, the law will presume that they are equal. Without the approval of the other owners, each owner may individually transfer, convey, or encumber their interest. It’s crucial to keep in mind this feature of a tenancy in common since it implies that your co-owner may sell their stake to anybody. More significantly, your co-owner may file a lien against the property or pledge his or her portion as security for a loan. Thankfully, a co-owner’s interest is not subject to the liens of another owner unless the owners are married or registered domestic partners; nevertheless, a forced sale may still take place. In contrast to other forms of joint ownership, ownership does not transfer automatically upon the death of one owner; rather, that owner’s interest is transferred to beneficiaries or heirs through the probate process. In California, a tenancy in common is the default form of joint ownership; in other words, it is created if the title documents are silent on the subject of joint ownership.
- Joint Tenancy. A joint tenancy can be established by two or more individuals or organizations. Marriage is not required to create a joint tenancy. Equal ownership interests exist, and joint tenancy must be specified in the ownership document. Each owner has the option to transfer their interest independently, but if one does so, the transfer creates a tenancy in common. Although liens from other owners do not affect a co-owner’s interest, a forced sale may take place before a co-owner passes away. The “right of survivorship” ensures that other owners automatically inherit a co-owner’s interest upon their death. ”.
- Community Property. The co-owners of this kind of joint title must be married or legally recognized domestic partners. The property is owned equally by the two owners, and any transfer or encumberment requires their approval. A forced sale of the entire property could occur to pay off a debt owed by a spouse or domestic partner. Unless a will specifies otherwise, the spouse or domestic partner inherits the owner’s half interest upon death.
As you can see, depending on the type of joint property you select, the co-owners’ ability to sell or encumber the property, the owner’s ability to have their creditors access the property, and what happens to the owner’s interest in the property after death will all be impacted.