Joint ownership sometimes includes a right of survivorship. When one joint owner dies, the survivors inherit his or her share without going through probate.
Attorney Thomas B. Burton answers a reader question about the reader's options for selling a condo owned jointly with another person when the other person does not want to sell.
Ways to Hold Real Estate There are different ways in which two or more persons may own a parcel of real estate. One way is called a "tenancy in common"; another is a "joint tenancy"; and yet another is a "tenancy by the entirety." What is a Tenancy in Common? A tenancy in common means that each person owns a particular percentage interest in the real estate. For example, if John Smith and his girlfriend, Mary Jones, hold a deed as tenants in common, it means that each of the two owners owns a 50% undivided interest. John or Mary are each free to give, sell, or bequeath his or her respective rights in the real estate. What is a Joint Tenancy? A joint tenancy means that the real estate is held "jointly with right of survivorship." This quoted language is typically the language that is found in a deed that reflects joint ownership. It means that neither John nor Mary can sell the property. If, say, John passes away, then Mary becomes the owner of the property. John's estate will not have an interest in the property. What is a Tenancy by the Entirety? A tenancy by the entirety is, essentially, joint ownership, except that it is between two persons who are married to one another. Thus, if John and Mary get married to one another, they may wish to change the deed to reflect their marriage. If the deed now says that the property is owned by "John Smith and Mary Jones, his wife," the addition of those words ("his wife") will reflect that it is a tenancy by the entirety. What if the deed is silent about joint ownership or the status of the marriage? If the deed is silent as to joint ownership and is similarly silent as to the parties' marriage to one another, then the property is held as a tenancy in common. Courts often refer to the "strong presumption" of a tenancy in common. What is the best way to hold a deed? That depends entirely on what you wish to ultimately happen to the property. In most cases, it makes sense for a married couple to have a right of survivorship, so that if anything happens to either person, the property will pass to the survivor.
Survivorship When real estate is held jointly with right of survivorship by two persons, the property will pass to the surviving owner when one of the owners passes away. (If the two persons are married to one another, the joint ownership will be referred to as a "tenancy by the entirety," but it is essentially the same as a "joint tenancy"). Transfer by Operation of Law Upon the death of one of the two joint owners, the property will pass to the surviving owner by operation of law. This means that the moment one of the two joint owners passes away, the property is owned by the survivor, even if a new deed is not recorded. Keeping it out of Probate When a property is jointly owned (or held by the "entirety"), the real estate is considered a "non-probate" asset. Thus, no probate or administration proceeding will ordinarily be necessary in order to transfer the property. Advantages of Joint Ownership When a property is owned with right of survivorship, the transfer of ownership is quick, easy, and cheap. By way of example, let's imagine that persons "A" and "B" (granted, they are not imaginatively named) own real property together, but not as joint tenants. If "A" dies, his interest in the property passes to his estate, so that "B" now owns the property with the estate of "A," and ultimately "A"'s heirs. If B wants to sell the property, he can't do so unless and until a probate or administration proceeding is done as to A's estate, and afterward B will be able to sell the property only if A's heirs agree. Joint Ownership Has a Downside Too While joint ownership works well for married couples or others who are in a committed relationship, and sometimes for close family members, it can be disadvantageous in situations in which the two owners have others whom they wish to benefit. As an example, A may have a wife or children whom he wants to benefit in the event of his own death, rather than B, who may be a friend or business partner. Speak to an Attorney Before deciding how to hold real property, be sure to speak with an attorney. The attorney will be able to evaluate your priorities and help you to make a decision that makes sense for you.
A. Are you familiar with California probate law and local court rules and procedures If so, you might be able to represent yourself. B. Can the deceased person's assets be transferred outside of probate? The answer to this question depends on how much (if any) probate-avoidance planning the deceased person did before death. Some common examples of assets that don't need to go through probate are assets are held in joint tenancy and community property with right of survivorship. Assets held in a living trust can also bypass probate. Probate is also unnecessary for assets for which the deceased person named a beneficiary--for example, bank accounts, retirement accounts and life insurance. C. Does the estate qualify for California's simple "small estate" procedures? Small California estates with assets totaling $150,000 or less may be settled without formal probate proceedings, using relatively simple transfer procedures. This summary form of probate is available regardless of whether the assets are real property or personal property as long as the following are true: No administration proceedings are pending or have been conducted for the decedent's estate or, if they have, the personal representative has consented in writing to the summary probate procedure. You must first compute the gross value of all property the decedent owned when he or she died. The gross value of all real and personal property owned by the decedent in California on the date of death can be no more than $150,000. This figure is the value of the property, not counting any money owed on the property. In other words, you cannot deduct debts while calculating the gross amount. There are separate California summary probate procedures for small estates. If the estate qualifies, anyone entitled to inherit property from the decedent, whether as a beneficiary under the will or an heir under intestate succession laws, may settle the estate and obtain title or possession of the property with these simplified probate transfer procedures. In most cases, the procedure can be completed in just a few weeks after the 40-day waiting period: 1. For personal property, 2. For real property not exceeding $50,000 in value, 3. For real or personal property not exceeding $150,000 in value. Spouses or domestic partners: In addition to the above, there is also a simplified California probate procedure for spouses or domestic partners. All property that a surviving spouse or domestic partner is entitled to receive outright from a deceased spouse or partner may be "set aside" to the survivor without formal probate. However, a Spousal Property Petition is required to be filed in the county in which the estate of the deceased spouse may be administered. 4. There is no limitation on the amount or value of the assets to be transferred and includes community property, separate property and quasi-community property (property acquired by married or registered couples outside California that would have been community property if acquired in California). To qualify as a "surviving spouse," the survivor must have been legally married to the decedent at the time of death. To qualify as a "surviving registered domestic partner," you must have registered your partnership with the decedent through the California Secretary of State by filing a Declaration of Domestic Partnership Form DP-1. A Spousal Property Petition would be appropriate for the following types of property: 1. Real property held in the names of the spouses in joint tenancy or where the deed does not indicate the manner in which title is held, 2. Real property held in the name of the decedent alone or with a third party, 3. Securities, stocks and bond in the names of the spouses as "community property" or "tenants in common" or in the name of decedent alone, 4. Trust deed notes or promissory notes payable to decedent alone or decedent and surviving spouse, 5. Motor vehicles in name of decedent alone or in name of decedent and surviving spouse but not joined by "or", 6. Bank accounts in the name of the decedent alone or decedent and surviving spouse. D. Are family members getting along? If a family member is making noises about suing over the estate, a probate lawyer may be able to help you avoid a court battle. E. Do you have plenty of time on your hands, and no time pressure with respect to the estate, and no pressure from creditors or heirs. If so, you might be able to represent yourself. F. Is there enough money in the estate to pay debts? If there's enough money to pay legitimate debts (for example, final income taxes, expenses of the last illness, and funeral costs), with some left over for beneficiaries under the will or state law, you won't have to figure out which debts to pay. If, however, there may not be enough money in the estate to pay debts and taxes, don't pay any bills before you get legal advice. G. Should I hire a Paralegal? A paralegal CANNOT give you legal advice, represent you in court, or choose your forms for you. Paralegals avoid these activities in order to protect themselves from being charged with the crime "unauthorized practice of law." The paralegal can only provide information, perform typing, proofread, and prepare documents as the executor instructs, and file them with the court. There are many paralegals that do not file your forms at the court for you. Oh, and by the way, if you do choose the paralegal and things don't work out the way they were supposed to because of what the person did or advised, don't expect your children to be able to hold that person responsible for the losses they've suffered. H. Will California probate attorney fees be excessive? California attorney probate fees are established by California law. The fees are paid from the assets of the estate upon conclusion of the probate. Only filing fees need to be advanced to proceed with a probate filing. If you believe the attorney probate fees will be excessive, you only need to compare them to other professional fees. They are typically much less. For example, under California probate law, to probate a $1,000,000 estate the attorney probate fee is calculated to be $23,000. This fee is considerably less than fees charged by realtors to market and sell property. No one considers the standard 6% commission on a real estate transaction to be out of line. To sell a $1,000,000 house, in a transaction which might only take 60 to 90 days, costs $60,000. To probate a $1,000,000 estate, which might take 6 to 9 months with several court appearances, the California attorney probate fee of $23,000 is significantly less.
Danger #1: Joint Ownership Only Delays Probate. When either joint tenant dies, the survivor -- usually a spouse or a child -- immediately becomes the owner of the entire property. But when the survivor dies, the property still must go through probate. Joint Tenancy doesn't avoid probate; it simply delays it. Danger #2: Two Probates When Joint Tenants Die Simultaneously. If both of the joint tenants die at the same time, such as in a car accident, there will be two probate administrations, one for the share of each joint tenant in the Joint Tenancy property as well as any other property they each may own. Danger #3: Unintentional Disinheriting of Planned Beneficiaries When blended families are involved, with children from previous marriages, here's what could happen: the husband dies and the wife becomes the owner of the property. When the wife dies, the property goes to her children, leaving nothing for the husband's children. Danger #4: Gift Taxes Ramifications. When you place a non-spouse on your property as a joint tenant, you make a gift of property every time that joint tenant takes property out of the account. For example, when a mother retitles her $80,000 home in Joint Tenancy with her son, she makes a gift to her son every time he makes withdrawals. This may not be the most efficient use of her $14,000 annual exclusion. The main point is that the gift is unintentional and not well planned. Danger #5: Right to Sell or Encumber is Restricted. Joint Tenancy makes it more difficult to sell or mortgage property because it requires the agreement of both parties, which may not be easy to get. Danger #6: Financial Problems of Joint Owner May Endanger Property. If either owner of Joint Tenancy property fails to pay income taxes, the IRS can place a tax lien on the property. If either owner files for bankruptcy, the trustee can sell the property even though the other joint tenant is not otherwise involved in the bankruptcy. Danger #7: Court Judgments May Attach to Your Ownership. If either joint tenant has a judgment entered against them, such as from a car accident or business dealings, the holder of the judgment can execute the judgment against the Joint Tenancy property. Danger #8: Incapacity of An Owner May Tie Up the Property Requiring Court Intervention.. If either joint owner becomes physically or mentally incapacitated and can no longer sign his name, the Court must give its approval before any jointly owned property can be sold or refinanced -- even if the co-owner is the spouse.
Married Persons whose Descendants are all Descendants of their Surviving Spouse Married persons (including persons waiting on a divorce decree but not yet divorced at the date of death) will inherit everything from their spouse after their death, as long as the deceased person does not have any living descendants that are not also descendants of the surviving spouse. For example: Jim and Jane have three children, Alice, Bob, and Charles. Jim dies without a Will. Jane receives all of Jim's property. Married Persons whose Descendants are not Descendants of their Surviving Spouse If there are surviving descendants of the deceased spouse that are not descendants of the surviving spouse, then the descendants of the deceased spouse receive everything on a per capita basis, minus the surviving spouse's share. Example: Jim and Jane have three children, Alice, Bob, and Charles. Jim has another child, David, from another marriage. Jim dies without a Will. Jane will not receive all of Jim's property, because David is a surviving descendant of Jim but is not a descendant of Jane. Surviving Spouse's Share is the first $75,000 (in 2009 dollars) of the estate, plus a full 50% of the remainder of the estate. Example: Jim and Jane are married. Jim has one child, Alice, from a previous marriage. Jane has one child, Bob, from a previous marriage. Jim and Jane have one child together, Charles. Jim dies without a Will. His assets are worth $575,000. Jane receives the first $75,000, plus 50% of the remainder, so she receives $325,000. Alice receives $250,000 of her father's estate. Bob receives nothing as Jim's stepchild. Charles receives nothing from his father's estate, but the Code drafters assume that he will be cared for by his mother, who received a sizeable portion of his father's estate. Note: If Jane had adopted Alice (her stepdaughter) before Jim's death, then for purposes of the Probate Code, all surviving descendants of Jim would also be descendants of Jane, and Jane would take Jim's entire estate at his passing. Adopted children are considered children under the Uniform Probate Code, but foster children and stepchildren are not. Property Used in Calculating the Spousal Share When calculating the spousal share, the estate's value includes the probate estate plus any non-probate transfers to the spouse, such as property owned in a joint tenancy with right of survivorship, POD (Pay on Death) accounts, and some types of life insurance policies. Any property received by the surviving spouse through one of these non-probate transfers is deducted from the spouse's share as an advancement. Example: Jim and Jane are married. Jim has one child, Alice, from a previous marriage. Jane has one child, Bob, from a previous marriage. Jim and Jane have one child together, Charles. Jim dies without a Will. His liquid assets are worth $575,000. Jim and Jane also own a home together worth $200,000 as joint tenants with right of survivorship. Jane receives the first $75,000, plus 50% of the remainder, including Jim's interest in the home. Since the remainder is $500,000 plus Jim's $100,000 fractional interest in the home that automatically passed to Jane, the total remainder of the estate is $600,000. Alice receives half of that, at $300,000. However, she has already received $100,000 of that $300,000 in the form of full ownership of the house, so she only takes $200,000 of the remaining assets, and $300,000 passes to Alice. Bob receives nothing as Jim's stepchild. Charles receives nothing from his father's estate. What to do Now? Once again, these rules are only default provisions. They can be modified by prenuptial agreements, Wills, trusts, and other instruments, depending on the specifics of your family and asset profile. If you are married with children from a previous marriage and you do not like these rules, meet with an estate planning attorney to find out how you can make sure your wishes are carried out.