How should you hold title to real estate in California?
Congratulations, your offer was accepted on your new home! The next step is for escrow to be opened. One of the questions that your escrow officer is going to ask you is how do you want to hold title to your new home.
Here are the four ways you can take title to your home or other type of real estate in California.
1. Sole ownership
If you are unmarried, you can own real estate in your name alone. The property will remain your sole and separate property — even if you get married later — so long as title remains in your name solely.
When a married person takes title to real property in his or her name alone in sole ownership, the spouse is usually asked to sign a quitclaim deed giving up any ownership interest in the property.
When the sole owner dies, any property held this way may be subject to administration in probate court, an expensive and time consuming process.
2. Tenants in common
When two or more people buy property together, especially if they are not married to each other, they often purchase property and hold title as tenants in common.
Each tenant in common owns a specified interest in the property, and it does not have to be an equal interest. The percentage of ownership for each tenant in common is specified on the deed.
Each tenant in common can sell or pass their interest via their estate to whomever they wish.
3. Joint tenancy with right of survivorship
When two or more people buy real estate together and hold title as joint tenants with the right of survivorship, the property is owned in equal shares by the joint tenants. Upon the death of one of the joint tenants, the surviving joint tenant is the sole owner of the property.
A joint tenant can sell or give his interest to the property to someone else without permission from the other co-owners. This action cancels the joint tenancy and creates a tenancy in common.
4. Community property
Married couples and domestic partners can hold the title to real estate as community property. Each spouse then owns a 50% share in the property, and that share can be passed by each person’s will to either the surviving spouse/partner or anyone else they designate.
In community property states like California, this form of ownership allows for a stepped-up basis of market value of the real estate upon the date of death of the first spouse/partner. The surviving spouse or partner can use the step-up market value of the property to avoid or reduce capital gains taxes when he or she decides to sell.
Because each way holding title to real property has numerous long-term legal implications, it is best to seek the advice of an experienced California real estate attorney when making these decisions.
Do you have questions about the different ways to hold title to real estate in California? Contact San Pedro Real Estate Attorney Barbara Craig to schedule a free consultation. Serving clients in the South Bay area including San Pedro, Rancho Palos Verdes, Lomita, Harbor City, Torrance, Wilmington, and other nearby communities.