June 13, 2012

Severance of a Joint Tenancy

A common method to hold title to real property in California is joint tenancy. For example, if John and Jane Doe purchase a home together, they can hold title as joint tenants simply by adding "as joint tenants" to their names.

One of the key features of joint tenancy is, as mentioned, right of survivorship. This legal term dictates that when one joint tenant dies, the surviving joint tenant automatically inherits the deceased joint tenant's interest in the property. CC §683; Prob C §223. For instance, if John Doe and Jane Smith owned their home in joint tenancy and John passed away after being hit by a bus, Jane would automatically inherit John's 50% interest in the home. To transfer John's interest in the home to Jane, she would simply have to file an affidavit of death of a joint tenant along with some other forms depending on the county in which the realty sits. Hence, there is no probate or trust administration needed to transfer an interest held in joint tenancy. This is particularly important because a few words can amount to thousands or hundred of thousands of dollars. The following example illustrates this point.

John Van Persie and Norm Vermaelen were best friends and decided to purchase a rental home together in Campbell, CA for $600,000 in 2012. They decided to take title as joint tenants because the real estate agent told them it would be easier that way. John wrote a will that devised his entire estate to his brother Arjen. Thereafter John passed away in April 2012 in a tragic skiing accident in Bear Valley, ID. Since title was held in joint tenancy, John's interest automatically passed to Norm, despite John's valid will. Conversely, if John and Norm had taken title as "tenants in common", John's interest would pass to his brother Arjen albeit a probate would be needed. Still, the use of the phrase "as joint tenants" instead of "tenants in common" amounts to a roughly $300,00 difference for Arjen.

In light of this, a few clients have asked to transfer property out of joint tenancy to tenancy in common because of the inflexibility of joint tenancy. The following are the methods in which joint tenancy is severed and a tenancy in common results. CC §683.2(a).
  1. Transferring the joint tenant's interest to a third person via a deed; 
  2. Executing a written instrument with intent to sever that transfers the joint tenant's interest out of joint tenancy and into tenancy in common via a deed; or
  3. Declaring the severance in writing.
For all these methods, the instrument must be recorded in the county where the real property is located. CC §683.2(c).