Joint Tenancy with Rights of Survivorship Vs. Tenants in Common
When two or more people own a property together, it creates a co-tenancy situation. Various co-tenancy rules, also known as vesting, exist to clarify what percentage of ownership each party holds and also what will happen to the share upon the death of an owner. In California, two common forms of vesting are joint tenants with rights of survivorship and tenants in common.
When taking title as joint tenants with right of survivorship, the ownership interest passes to the remaining joint tenants when one dies. Tenants in common each own a specific share of the property and pass it to their heirs.
Property Deeds and Titles
When a property is purchased, the seller signs a deed granting the buyers ownership. The deed must include the names of the sellers – known as the grantors – and the buyers, known as grantees. The vesting that the grantees choose will be listed after their names on the deed. Additionally, the deed contains a description of the property. Deeds are filed on public record with the county clerk. By recording the deed, the title report to the property will reflect the change in ownership. A new title search would show the grantees as the owners, and it also lists their vesting.
Joint Tenancy with Rights of Survivorship
Joint tenancy with rights of survivorship is common between married couples. In this co-ownership, each party owns the property equally and undivided. If one party wishes to transfer his share to someone else during his lifetime, the other owner must consent and sign the resulting deed. The rights of survivorship imply that upon the death of one owner, his share is transferred automatically to the surviving owner. The survivorship rights take precedence over the deceased's will or inheritance rules.
Tenants In Common
In tenants in common ownership situation, two or more owners can own equal or unequal shares of the same property. For example, two owners can hold equal shares, or multiple owners can own different percentages that equal 100. The shares in ownership are separate from one another. So one owner can transfer his share to someone else at any point in time without the consent of the other owners. If an owner dies, his share in the property is passed along to the person named in his will or to his surviving heirs if no will exists.
Community Property States
In California, when a married couple purchases real estate together, they automatically hold the property as community property. This title is identical to a joint tenancy with a right of survivorship. Community property allows for the immediate death transfer of the property to the survivor without going through probate. You don't need a specific deed to create community property in California, although many couples write "community property with a right of survivorship" on the transfer deed.
Things to Consider
Before purchasing a property with another person, carefully consider the methods of vesting available before choosing the ones to suit your needs. The survivorship rights with a joint tenancy allows for the probate process to be avoided when the first owner dies; however, probate will eventually be needed when the surviving owner eventually dies. It's possible to terminate a joint tenancy situation by drafting a new deed to change the vesting. When entering into a tenancy in common, it can be a good idea to draft an agreement between the owners to address the situation if one of the owners wants to transfer their share. Although transferring is allowed, it might cause a stressful situation for the remaining owners on a personal or financial level.