Vesting, or how to hold title to real estate, is important for estate planning and tax reasons. Each state in the U.S. has its own vesting rules. When you purchasing real estate, you should consult with an accountant or tax attorney before the sale closes and the deed is recorded. Disclaimer: I am a California Licensed Real Estate Broker/Agent and NOT a CPA, tax professional or attorney and since I do not know your specific situation, this is a broad overview of the most common options.
Title to real estate in California may be held by individuals, either insole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summary highlights eight of the more common examples of Sole Ownership and Co-Ownership.
1. A Single Woman/Man: A woman or man who is not legally married. Example: Jane Doe, a single woman.
2. An Unmarried Woman/Man: A woman or man, who having been married is legally divorced. Example: Jane Doe, an unmarried woman.
3. A Married woman/Man, As Her/His sole and Separate Property: When a marred man or woman wishes to acquire title in her or his name alone, the spouse must consent, by quitclaim deed or otherwise, to transfer thereby relinquishing all right, title and interest in the property. Example: Jane Doe, a married woman, as his sole and separate property.
4. Community Property: the California Civil code defines community property acquired by husband and wife, or by either. Real property conveyed to a married woman or man is presumed to be community property unless otherwise stated. Under community property, both spouse have the right to dispose of one half of the community property. If a spouse does not exercise her/his right to dispose of one-half to someone other than her/his spouse, then one half will go to the surviving spouse. If a spouse exercises her/his right to dispose one half, that half is subject to administration in the estate. Example: John Doe & Jane Doe, husband and wife. Example: Jane Doe, a married woman.
5. Joint Tenancy: a joint tenancy estate is defined in the Civil Code as follows “A joint interest is one owned by tow or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy.” A major characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property immediately vests in the surviving joint tenant(s). As a consequence, join tenancy property is not subject to deposition by will. Example: John Doe and Jane Doe, husband and wife as joint tenants.
6. Tenancy In Common: Under tenancy in common, the co-owners own undivided interests, but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arise at different times. There is no right of survivorship; each tenant owns an interest which, on his or her death, vests in his or her heirs. Example: John does, a single man, as to an undivided 1/3 interest, and Henry Adams, a single man as a n undivided 2/3rd interest, as tenants in common.
7. Trust: Title to real property in California may be held in a title holding trust. The trust holds legal ad equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all the management rights and responsibilities.
8. Community Property with Right of Survivorship: Community Property of a husband and wife, when expressly declared in the transfer document to be community property with the right of survivorship. and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy.
I strongly recommend you seek professional counsel from a CPA, attorney or tax professional to determine the legal and tax consequences of how title is vested.