How Should You Take Title to Your Home? (Part 3 of 3)
Something that is often overlooked when buying your home is how you should take title to your home. For most of you, when you buy a home, your biggest concerns are with the price, the location, the aesthetics, the school district, etc.
Once you find the home of your dreams, you’ve qualified for the loan, and the inspection goes well, you’re stuck with signing page after page of documents. Many of the documents just require a signature, but some actually require some decision making. One of the most important decisions you make when you buy a home is how should you take title to your house. You will likely receive advice on how to take title to your home from your real estate agent, title officer, or neighbor. As you can imagine, the advice you will receive is often times incorrect or just based on what others have done in the past.
Did you know that the laws on how you can take title to your home changed in 2001? So perhaps even if your parents or neighbors made an informed decision when they bought their home, it does not mean that you should make the same decision given the changes in the laws.
Your home will likely be the largest purchase you will ever make and also the largest asset that you will pass on to your children when you die. Thus, how you take title to your home will dramatically affect your spouse, your children and your estate.
Different Ways You Can Take Title to Your Home
- Single Man or Single Woman
- Joint Tenancy with Right of Survivorship
- Community Property
- Community Property with Right of Survivorship as of 2001
- Tenancy in Common
- In the form of an entity, such as a Trust or LLC
Purchasing a Home as a Single Man or as a Single Woman
If you are single, and you are purchasing a home on your own, there is not much to think about because you will be taking the home in your name alone as a single man or woman. Of course, if you have had a Trust prepared for you by an Orange County estate planning attorney at Modern Wealth Law, you should purchase the home in the name of your Trust, or transfer it to your Trust as soon as you close escrow so that you can avoid probate.
Purchasing a Home as a Married Couple
If you are married, or if you are purchasing your home with one or more other persons, there are several questions which you must consider.
- Is your home being purchased with your separate property or with your community property?
- Is your home being purchased equally between you and your spouse?
- Who do you want to give the home to when you die?
- How will basis (the price you paid) in the home be affected if one person dies?
Taking Title in Joint Tenancy with Right of Survivorship
Joint tenancy is a form of co-ownership in which two or more persons own property in equal undivided interests. CC §683. The right of survivorship is a key feature of joint tenancy. Unless the joint tenancy is severed by any of the methods described in CC §683.2, a deceased joint tenant’s interest vests in the surviving joint tenant or tenants at the moment of death without requiring probate administration. CC §683.2(c). Because of survivorship rights, a joint tenant’s interest is not subject to testamentary disposition or, after death, to his or her debts.
Taking Title as Community Property
Community property is property acquired by a married person during marriage while domiciled in California. CC §687; Fam C §760. With community property, as with a joint tenancy, spouses or registered domestic partners have equal interests during their marriage or domestic partnership. Fam C §751. Unlike joint tenancy, however, couples with community property interests have the flexibility, both before and during a marriage or domestic partnership, to specify their property interests in writing, alter or transmute those interests, and compromise their interests on dissolution of their marriage or domestic partnership. See Fam C §§850–853, 1500, 2550. Also unlike joint tenancy, there is no right of survivorship attendant to community property unless specified in the conveyance document.
Taking Title as Community Property with Right of Survivorship
Property owned as community property with right of survivorship under CC §682.1 retains all the features of community property (including receipt of a new basis on death for both halves, with respect to community property of spouses under IRC §1014 but with respect to community property of registered domestic partners for California income tax purposes only; see §7.30), except that the property passes on death to the survivor, without administration, in the same manner as joint tenancy property. In other words, this form of title combines the advantages of a community property designation and the right of survivorship.
For many registered domestic partners, and for married clients who have decided not to create a joint revocable trust, who want their spouse or partner to take their interest in the community property real property when they die, this method of holding title may be the best option. The surviving spouse or partner will not have to go through a probate or other court proceeding. On the death of one of the spouses or partners, the property will be subject to the same simple procedures as property held in joint tenancy. CCP §682.1(a).
Possible disadvantages are similar to those for joint tenancy. As with joint tenancy property, no further planning is possible because the property vests in the surviving spouse or registered domestic partner at the moment of the decedent’s death. If the surviving spouse or partner retains the property until death, it is usually included in the estate and is subject to estate taxes and probate administration. In addition, community property with right of survivorship appears to be community property for purposes of liability for debts, and would therefore generally be liable for the debts of either spouse or domestic partner. In some cases, true joint tenancy might provide better asset protection, particularly with respect to debts of the deceased spouse.
Taking Title as Tenancy in Common
A tenancy in common is any interest owned in common by two or more persons that is not a joint tenancy, tenancy in partnership, or community property. CC §§685–686. Unlike a joint tenancy, however, tenancy-in-common interests need not be equal, and there is no right of survivorship. Therefore, co-owners can conform their ownership interests to their respective contributions to the cost of purchasing and owning a property, and each can make a testamentary disposition of his or her interest.
John Wong advises on all aspects of estate planning, probate, asset protection and trust administration. He believes that estate planning is about planning for life; while having protections in place should the unexpected occur.
