Holding Title to Real Estate in California
Only attorneys can provide advice on how people should hold title to real estate. How title is held has many highly significant ramifications that include who exactly owns the property, what happens upon death, how are any profits or capital gains allocated, who pays taxes, who is responsible for creditor claims, and more. Buyers of real estate in California should consult with a California licensed real estate attorney for advice.
Following are common ways that people hold title in California. This information is being provided for educational purposes. It is not legal advice.
Under current law, California recognizes same sex relationships that are legally performed or entered into in California and in other states and other countries. This recognition includes same sex marriages and other types of legal unions that are similar to registered domestic partnership status.
Although we use the title "registered domestic partner" below, the term "domestic partnership" will be used to include both California registered domestic partnerships and all non-marital legal unions that are recognized in California such as Civil Unions.
Common Methods of Holding Title
Sole ownership is ownership by an individual or an entity capable of acquiring title. Common examples are:
A Single Man or Woman, an Unmarried Man or Woman or a Widow or Widower:
For example: Michael Buyer, a single man.
A Married Man or Woman as His or Her Sole and Separate Property:
The title company insuring title will require the spouse of the married man or woman acquiring title to disclaim or relinquish his or her right, title and interest to the property. This establishes that both spouses want title to the property to be granted to one spouse as that spouse's sole and separate property. The same rule will apply for same sex married couples. For example: Michael Buyer, a married man, as his sole and separate property.
A Domestic Partner as His or Her Sole and Separate Property:
The title company insuring title will require the domestic partner of the person acquiring title to disclaim or relinquish his or her right, title and interest to the property. This establishes that both domestic partners want title to the property to be granted to one partner as that person's sole and separate property. For example: Michael Buyer, a registered domestic partner, as his sole and separate property.
Title to property owned by two or more persons may be vested in the following ways:
A form of vesting title to property owned together by married persons or by domestic partners. Community property is distinguished from separate property, which is property acquired before marriage or before a domestic partnership, by separate gift or bequest, after legal separation, or that which is agreed to in writing to be owned by one spouse or domestic partner.
In California, real property conveyed to a married person, or to a domestic partner is presumed to be community property, unless otherwise stated (Le. property acquired as separate property by gift, bequest or agreement). Since all such property is owned equally, both parties must sign all agreements and documents transferring the property or using it as security for a loan. Each owner has the right to dispose of his or her one half of the community property by will. For example: Michael Buyer and Christian Buyer, husband and wife, as community property, or Linda Smith and Jane Smith, registered domestic partners as community property. Another example for same sex couples: Linda Smith and Jane Smith, who are married to each other, as community property.
Community Property with Right of Survivorship:
A form of vesting title to property owned together by spouses or by domestic partners. This form of holding title shares many of the characteristics of community property but adds the right of survivorship similar to title held in joint tenancy. There may be tax benefits for holding title in this manner. On the death of an owner, the decedent's interest ends and the survivor owns all interests in the property. For example: Michael Buyer and Linda Buyer, husband and wife, as community property with right of survivorship, or John Buyer and James Buyer, husband and husband, as community property with right of survivorship. Another example for same sex couples: Christian Smith and Jamie Smith, registered domestic partners, as community property with right of survivorship.
A form of vesting title to property owned by two or more persons, who mayor may not be married or domestic partners, in equal interests, subject to the right of survivorship in the surviving joint tenant(s). Title must have been acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate. When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant(s). Therefore, joint tenancy property is not subject to disposition by will. For example: Michael Buyer, a married man and James Christian, a single man, as joint tenants.
Note: If a married person enters into a joint tenancy that does not include their spouse, the title company insuring title may require the spouse of the married man or woman acquiring title to specifically consent to the joint tenancy. The same rules will apply for same sex married couples and domestic partners.
Tenancy in Common:
A form of vesting title to property owned by any two or more individuals in undivided fractional interests. These fractional interests may be unequal in quantity or duration and may arise at different times. Each tenant in common owns a share of the property, is entitled to a comparable portion of the income from the property and must bear an equivalent share of expenses. Each co-tenant may sell, lease or will to his or her heir that share of the property belonging to him or her. For example: Michael Buyer, a single man, as to an undivided 3/4 interest and Linda Adams, a single woman, as to an undivided 1/4 interest.
Other ways of vesting title include:
A corporation is a legal entity, created under state law, consisting of one or more shareholders but is regarded as having an existence and personality separate from the shareholders.
A partnership is an association of two or more persons who can carry on a business for profit as co-owners, as governed by the Uniform Partnership Act. A partnership may hold title to real property in the name of the partnership.
Trustees of a Trust*:
A Trust is an arrangement whereby legal title to property is transferred by a grantor to a person called a trustee, to be held and managed by that person for the benefit of the people specified in the trust agreement, called the beneficiaries. A trust is generally not an entity that can hold title in its own name. Instead title is usually vested in the trustee of the trust. For example: Michael Buyer, trustee of the Buyer Family Trust of 2022.
Limited Liability Companies (LLC)*:
This form of ownership is a legal entity and is similar to both the corporation and the partnership. The operating agreement will determine how the LLC functions and is taxed. Like a corporation, its existence is separate from its owners.
*In cases of corporate, partnership, LLC or trust ownership, the required documents may include corporate articles and bylaws, partnership agreements, LLC operating agreements and trust agreements and/or certificates.
How title is vested has important legal and tax consequences. The tax consequences may be different for same sex legally related couples. You should consult an attorney or tax advisor to determine the most advantageous form of ownership for your particular situation.
Note: Registered domestic partnership status is not limited to same sex couples.
Nationwide Accounting Services