Forms Of Ownership

Title to real property in California may be held by individuals, either in Sole Ownership or in Co-Ownership. The following brief summaries illustrate the more common examples of sole ownership and co-ownership. In view of the complexity and value of California real estate, you are advised to consult with your respective tax advisor or attorney who may fully advise you as to the legal and tax consequences incident to each form of title ownership.

Sole Ownership Of Real Property By Individual

1. A Single Man Or Woman
   By a single man or woman who is not legally married.
2. An Unmarried Man Or Woman
   An unmarried man or woman, who having been married, is legally divorced.
3. Married Person, As His Sole And Separate Property
   A married person who wishes to acquire title in his or her name alone. The spouse must consent by Quitclaim Deed or otherwise, to said acquisition of title, thereby relinquishing all right, title, and interest in the acquired property.

Co-Ownership Of Real Property By Individuals

1. Joint Tenancy
   An estate owned jointly in undivided shares by two or more persons with right of survivorship distinguishes Joint Tenancy from all other forms of co-ownership. Upon death of a joint tenant, his interest is not part of his estate and does not pass to his heirs or devises; it cannot be disposed of by will, and his heirs acquire no interest or estate in the property. The deceased's interest in the property passes to the surviving joint tenant(s).
   
   While Joint Tenancy accomplishes the goal of avoiding probate, the danger of a husband and wife holding title as joint tenants in significant. First, holding title as joint tenants deprives the surviving spouse of the "stepped-up basis" after the death of the first spouse. Where title to the property is held by the husband and wife as joint tenants, only one-half of the property receives a "stepped-up basis". The other half of the property remains at the original basis. This means that a surviving spouse may be required to pay a substantial income tax on the gain of a sale of the property. This income tax can be significantly avoided by holding title as community property or as trustees of a Revocable Living Trust.
2. Community Property
   Community property is all real estate property situated in California and all personal property wherever situated, that has been acquired during the marriage by a married person while domiciled in California and which is not the separate property of either spouse. Separate property is that property which was acquired before marriage, or during marriage by gift, descent, bequest, or devise. Each spouse has testamentary power over his or her one-half interest in the community property - there is no right of survivorship. If no express disposition is made, the interest of the deceased spouse passes to the surviving spouse. Real property conveyed to a married man or married woman is presumed to be community property.
3. Tenants In Common
   Tenancy In Common ownership by two or more persons unless acquired by them for partnership purposes, is declared in its creation to be a joint-tenancy interest, or is acquired as community property. A tenancy is common interest of each owner need not be equal or created at the same time. There is no right of survivorship, and each co-tenant may dispose of his or her interest.
4. Revocable Living Trust
   A trust is a fiduciary arrangement by which a Trustor transfers title to property with the intention it be held and administered by the Trustee for the benefit of the named beneficiary. The revocable trust has in many instances proven to be a practical estate planning devise which protects the estate from probate, potential conservatorship, and in many cases from capital gains and estate taxes.
   
   The trust ensures greater flexibility than Joint Tenancy, and if properly structured, can provide for management of the property before or after an individual's death. It can also provide for discretionary payment of income and principle to meet beneficiaries needs.
   
   Since assets transferred to a living trust receive a "stepped-up basis", the surviving spouse realizes significant tax savings upon the sale of the property.