5 Ways to Hold Title in California
In this blog , Keystone will break down, the types of property deeds, ways to hold title in California, and California title-vesting options to help you enforce your ownership rights when buying, transferring or using property.
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When a person purchases or inherits certain types of property (e.g., real estate, bank accounts, vehicles), their ownership interest in the property will be evidenced by a document. For real property, that document is known as a deed, and it establishes who holds title to the property.
When completing the transfer or purchase of property, it is important to consider types of deeds and ways to hold title in California, which include sole ownership, community property, community property with right of survivorship, joint tenants with right of survivorship and tenants in common. Keep reading to learn more about California’s title-vesting options.
What is Title?
Before we delve into the ways to hold title in California, it is important to understand the meaning of title: it describes a person’s ownership and usage rights to a piece of property. The term title is most often used in relation to real property, but it can also refer to the manner in which personal property (e.g., vehicles, artwork, bank accounts) is held.
With regard to real property, for a person to hold title, they generally must be the recipient of a physical document known as a deed, which states that the subject real property is being conveyed to them. The type of deed they sign will depend on the manner in which they wish to hold title to the property. We go over the various ways to hold title in California below.
Types of Deeds in California
When the ownership of real property is being transferred from one person or entity to another, a deed is generally recorded with the County Recorder to memorialize the transfer of ownership.
It is important to note that deeds can be used to convey different types of ownership. For example, deeds can convey complete and total ownership of a property, which is known as “fee simple” ownership. Deeds can also be used to convey something less than full ownership rights, like a “life estate,” which grants the recipient certain temporary rights of ownership for the duration of their lifetime. In this article, we will focus on fee simple ownership.
As noted above, a deed is a document that conveys ownership. It can be used either to transfer ownership rights from a current owner to a new owner, or to add another owner onto title for the property. There are different types of deeds available in California to serve a variety of needs; the type of property deed that is ultimately used will depend upon the nature of the transfer being carried out.
Some of the more common types of deeds you may have heard of include the following:
- Grant deed: A grant deed is used to transfer ownership from the current owner to a new owner, or to add a new owner to title (e.g., trustees use grant deeds to transfer property belonging to the trust to its intended beneficiaries). Grant deeds warrant that the grantor (the person or entity transferring the property) has a legal interest in the property and that there are no claimants to the title, as well as no other restrictions or liens on the property.
- Quitclaim deed: A quitclaim deed is used to transfer ownership from the current owner to a new owner, to add a new owner to title or to disclaim or waive ownership rights in favor of another party (e.g., a divorced spouse signs a quitclaim deed to cede ownership rights to the family home as part of a divorce settlement). Unlike a grant deed, a quitclaim deed makes no warranties regarding the grantor’s legal interest in the property.
- Interspousal deed: An interspousal deed is a type of grant deed used to confirm sole ownership of a property to one spouse or domestic partner. It can also be used to change the character of real property to or from community property in marriages or domestic partnerships (e.g., a newly married spouse uses an interspousal deed to change the character of their separate real property into community property). Interspousal deeds are often used in divorce proceedings to confer sole ownership of a community property asset to one spouse.
- Trust Transfer Deed: A trust transfer deed is typically a grant deed that is used to convey property from an individual into the individual’s trust. Trust transfer deeds are often utilized by settlors after a trust is created to fund their real property into the trust.
- Transfer on Death Deed (TOD): In California, a transfer on death deed is a revocable deed used to leave a real property asset to designated beneficiaries without the property being subject to probate. Unlike a traditional deed, TOD deeds do not convey a present interest in the property to the recipient; rather, the TOD deed only takes effect upon the death of the settlor and can be revoked by the settlor at any time during their lifetime. (Learn more about revocable transfer on death (TOD) deeds.)
Vesting title to real estate tends to be more complicated than vesting title to personal property, as real estate not only consists of the real property itself; it includes usage and ownership rights, too. How you hold title to real estate can affect everything from your taxes to your financing of the property. For this reason, anyone inheriting or purchasing real property should speak with a lawyer or financial adviser prior to vesting title.
How to Hold Title in California
A person is generally not considered a legal owner of property until their name is added to title. For example, a beneficiary who stands to inherit real property through a will or trust is not considered a legal owner of the property until the executor/administrator or trustee, respectively, signs a document transferring title to the property into their name.
Property transfers can arise in the context of inheritances, marriages, divorces, business dealings and real estate sales, among other things. It is crucial for anyone who is being transferred property to understand the various ways to hold title in California, because the California title-vesting option they select will affect not only their ownership rights, but also the ways in which they are entitled to use the property.
In California, there are five main ways to hold title. California title-vesting options include:
- Sole ownership
- Community property
- Community property with right of survivorship
- Joint tenants with right of survivorship
- Tenants in common
We go over the definitions of each of these ways to hold title in California in the following sections.
1. Sole and Separate Ownership
Many of our clients ask: “What is sole ownership? What does it entail?” If you are the sole and separate owner of real property, it means that you have an undivided interest in the property (i.e., there are no other owners).
Likewise, when a deed indicates that a certain piece of real estate is the “sole and separate property” of a given owner, it means that the intent of the owner of the property is to hold the property as their separate property. However, it is worth noting that if the property was acquired by one spouse during marriage, all or a portion of the property could be considered community property (i.e., property that is equally owned by both spouses), regardless of whether title is acquired in the sole name of one spouse, unless the other spouse signs a document waiving their ownership rights.
2. Community Property
California is known as a community property state. This means that the law presumptively considers any property that was acquired over the course of a marriage or domestic partnership as belonging equally to both partners, regardless of which partner acquired the property. In contrast, property acquired via gift or inheritance, or property acquired prior to marriage is not considered community property.
Because community property laws only entitle each spouse or domestic partner to a 50% interest in marital property, they cannot dispose of more than their 50% share of the property through their estate planning documents. Similarly, if a couple gets divorced, each spouse will only be entitled to 50% of the property, subject to some exceptions. Many couples who divorce decide to sell the property and divide the proceeds equally.
The only time community property laws may not apply is if the spouses or domestic partners had previously entered into a marital agreement (such as a prenuptial or postnuptial agreement) in which they waived their community property rights.
3. Community Property With Right of Survivorship
Despite sounding similar, community property and community property with right of survivorship in California have very different implications.
What is right of survivorship in California? Is the right of survivorship automatic? If title to property is held as community property with a right of survivorship, it simply means that the surviving spouse or domestic partner automatically assumes full ownership of the property upon the death of the other title holder (i.e., their spouse or domestic partner).
Conversely, if title is held as just community property, then the deceased spouse has the right to dispose of 50% of the property through their will or trust.
4. Joint Tenancy With Right of Survivorship
Joint tenancy is a form of title in which two or more persons share equal ownership of a property in addition to being equally responsible for any obligations (e.g., debts, repairs) that arise as a result of it. Joint tenancy with right of survivorship is a California title-vesting option that can be used by any two or more people, regardless of whether they are in a marriage or domestic partnership.
A key component of joint tenancy agreements is the right of survivorship. In other words, when one joint tenant dies, the other joint tenant or tenants automatically gain ownership and usage rights of the deceased tenant’s share of the property. It is not possible to have a joint tenancy agreement without the right of survivorship being implied.
5. Tenancy in Common
Tenancy in common is another viable option for two or more owners who wish to jointly own property. When a property has tenants in common, it simply means that ownership is shared, and that each owner has a distinct and transferable interest in the property.
If multiple parties are jointly purchasing a property but cannot make equal contributions, tenancy in common is a good way for them to hold title, as equal contributions are not required with this California title-vesting option. For instance, if a tenant in common can only afford to pay 20% of the purchase price, they could secure a proportional 20% interest in the property, with the remaining 80% interest going to the other tenant in common. Unless they have entered into a legal contract that forbids them to terminate their interest in the property, tenants in common also have a legal right to sell their fractional share of a property.
A key feature of tenancy in common is that owners do not have a right of survivorship (i.e., there is no such thing as tenants in common with right of survivorship). In other words, if a tenant in common dies, their portion of the property will either go to their heirs if they don’t have an estate plan, or be disposed of through their will or trust.
Comparing California's Title-Vesting Options
Based on the information above, what is the ideal way to hold title in California? How do you want to hold title if you are single? How do you want to hold title if you are jointly purchasing a property with others? How do you want to hold title if you are married? How do you want to hold title if the property in question belongs to a trust? How do you want to hold title if the property in question is not real property but personal property?
It is important to learn the answers to these questions before vesting title, because to choose the California title-vesting option that’s right for you, you will need to consider a variety of factors, including your marital status and ownership interest, the type of property in question, tax implications, and your estate planning goals, among other things.
Because the specifics of your situation determine which California title-vesting option is ideal, it is best to speak with a lawyer, who can present you with the advantages and disadvantages of each California title-vesting option prior to your making a decision about how to vest title.
For more details about California’s title-vesting options, read our article about the advantages and disadvantages of each title-vesting option.
Why Are the Ways to Hold Title in California Important in Probate?
The decision of how to hold title is so important because it has far-reaching consequences in everything from marriage and divorce, to bankruptcy and death.
Upon a person’s death, it is not uncommon for property disputes surrounding their assets to arise among their surviving loved ones. When this happens, the California title-vesting option that was selected by the decedent for the real or personal property in question very likely will play a role in determining the party or parties to whom the property will pass.
A person’s way of holding title may come into play in probate when:
- There is a dispute over the ownership of the decedent’s property (see Guide to Probate Code 850 and Heggstad Petitions);
- Co-owners of real property are seeking to terminate their interests in the property through a partition action (see Guide to Partition Actions);
- There is a dispute surrounding the character of a decedent’s property because the title and community property presumptions are in conflict (see Estate of Wall and requirements for changing community property to separate property);
- Creditors are seeking to enforce judgments against deceased debtors’ estates.
While the community property presumption tends to take precedence in property disputes between spouses during life, recent case law indicates that the title presumption may reign supreme in probate court after the death of an owner. Because of the different rules surrounding property that apply during the spouses’ lifetimes versus after the death of a spouse, property disputes that take place in the probate court can be difficult to navigate without the assistance of a skilled probate attorney.
Still have questions about the different ways to hold title in California? Our attorneys are standing by to help.
How do you want to hold title to property if you are married? How do you want to hold title to property if the joint owners are unmarried? California’s title-vesting options can be complicated to understand. Luckily, Keystone’s probate attorneys are well-versed in the ways to hold title in California and can help you decide what the ideal way for you to hold title is based on the property at issue, its owners, and your intentions for the property. Call us today to schedule your free consultation.