How Title to Your Real Property Affects Your Estate Plan
When you purchase a property, escrow will send you instructions and ask you how you want to title your property. Although it seems like a quick “check the box”, this decision has major consequences, particularly with what happens to that property when you pass away. There are several common ways to hold title in California.
In a joint tenancy, all tenants have an equal right to use and possess the property, and upon the death of one tenant, their interest in the property automatically passes to the surviving tenants. This method of holding title avoids probate until there is only one surviving owner. After that surviving owner passes away, the property will be administered through probate unless it is transferred to a Trust during that owner’s lifetime.
Tenants in Common
If a property is held between owners as tenants in common, each tenant owns a specific percentage of the property and upon the death of one tenant, their interest in the property passes to their chosen heirs, not necessarily the surviving tenants. This means that each owner’s interest will be administered through probate even if a surviving owner is living. That is, unless each owner transfers their interest to their Trust. Tenants in common is how more than one trust can jointly own a property.
Community property refers to a type of co-ownership that exists between married couples or domestic partners in certain states in the US, including California, where both partners have equal ownership of property acquired during the marriage or partnership.
Holding Property In Trust
Holding property in trust refers to a legal arrangement in which a trustee holds and manages property for the benefit of one or more beneficiaries. When you own real property in California, it is important to transfer that property to your living trust in order to avoid probate as well as take advantage of other benefits of transference of that property to your beneficiaries. The Trust can also hold that real property in trust after your death to be managed for beneficiaries who are minors or who are spendthrifts and, thus, need their inheritance managed.
Property owners should seek legal counsel with questions about ownership rights and conveyance of real property. If you are interested in learning more, please contact our office at 424-242-5021 or firstname.lastname@example.org for a free consultation.
Nothing in this article should be construed as legal advice. For specific guidance regarding your situation, please contact an attorney.