Whether you’re single, coupled up, or married, deciding how to hold title to your family home is one of the most critical decisions home buyers make. The effects of that decision may not be apparent for years, says The Washington Post in the recent article, “What you need to know about holding title to a home with a loved one.”
There are three primary ways to title property between spouses. Joint tenancy is very common because the asset automatically passes to the surviving joint owner when one dies. In California, spouses also take title as “tenants in common” which means that each spouse owns an undivided one-half interest in the property and can dispose of it how he or she wants upon death. Lastly, in California, we also have "Community Property With Right of Survivorship." This means the asset is a community property asset and transfers to the surviving spouse upon the death of the first spouse.
When a couple acquires a home before marriage they often take title as joint tenants. The drawback to joint tenancy, is that it’s possible for one’s interest to be alienated by deed or by a judgment lien or bankruptcy. Also, if one of the joint tenants (whether married or not) becomes incapacitated, the other joint tenant has no authority to sell the property without proper estate planning documents or court supervision.
There are also income tax differences for spouses holding assets as a joint tenant vs community property. Ask your estate planning attorney about any changes to the title of the property, to be certain that title is set up this way.
Generally, if a person owns real estate their gross estate exceeds $150,000. In California, if your gross estate exceeds $150,000 then your assets are subject to probate upon your death. The best way to avoid probate, deal with any income and estate tax issues related to the property, and make sure the property goes to your intended heirs is to create a trust to hold your property. The Trust allows your successor trustee, either during your incapacity or after your death, to manage the property without court supervision.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: The Washington Post (April 15, 2019) “What you need to know about holding title to a home with a loved one”