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Joint tenancy is a common arrangement for owning real estate in California, and much of the United States. The following are various questions that address some key aspects of joint tenancy.
1. What is a joint tenancy in terms of real property?
A joint tenancy is a method of holding title to real property by two or more persons in equal shares. CC §683.
2. How can I create a joint tenancy?
A joint tenancy is created by inserting certain language on the deed, the document that transfers ownership of real estate. For example, assume best friends Aaron Rivers and Chad Stafford wish to purchase real estate together and own it as joint tenants. Aaron and Chad would instruct the title company to insert the phrase “as joint tenants” or “in joint tenancy” after their names as grantees on the deed. So if Joe Clyde and Bonnie Clyde sold the property to Aaron and Chad, the deed would read, as to the Grantor-Grantee section:
For a valuable consideration, receipt of which is hereby acknowledged,
Joe Clyde and Bonnie Clyde, husband and wife
hereby grant to
Aaron Rivers and Chad Stafford, as joint tenants
3. How is ownership allocated amongst the joint tenants?
Each joint tenant owns an equal undivided share of the property. Rupp v. Kahn (1966) 246 CA2d 188. Thus, if there are 4 joint tenants, then each joint tenant would have a 25% interest in the property.
4. How can a joint tenant change the joint tenancy arrangement?
A joint tenant can sever the joint tenancy by transferring their interest to a third party or themselves, recordation of a written declaration, agreement of the joint tenants, a partition decree or judgment.
For example, recall from Question #3 that Aaron and Phillip purchased a property as joint tenants. Aaron became disgusted with Phillip’s decisions about maintaining the property and decided to terminate the joint tenancy. Aaron executed a deed which conveyed his interest to himself as a tenant in common with Phillip. This deed would sever the joint tenancy relationship between Aaron and Phillip.
5. What happens after a severance?
When the joint tenancy is severed, it becomes a tenancy in common. Estate of Propst (1990) 50 C3d 448. One key feature of a tenancy in common is that there is no right of survivorship on the death of a tenant in common unlike a joint tenancy.
6. What is right of survivorship for real property?
Right of survivorship is the automatic transfer of an interest in the real property, by operation of law, from the deceased joint tenant to the surviving joint tenant. Grothe v Cortlandt Corp. (1992) 11 CA4th 1313. Thus, regardless of what a will or trust dictates, the deceased joint tenant’s interest in a piece of real property transfers to the surviving joint tenant.
7. How do you transfer ownership interest from a deceased joint tenant to another?
There are two methods in which a deceased joint tenant’s interest can be transferred, (1) by an affidavit procedure and (2) by a court order. Prob C §210. The vast majority of joint tenancy transfers are done via the affidavit procedure. The affidavit needs to be signed by a person having knowledge of the facts which includes the legal description of the real property at stake and an attested or certified copy of the decedent's death certificate needs to be attached to the affidavit. Prob C §210. This affidavit is filed with the County Recorder in the county in which the real property is located.
8. What other ways can multiple people own real property?
Multiple people can own real property in tenancy in common, community property or partnership interests. CC §§682-687.
9. Can a joint tenant force a sale of real property?
Yes, a joint tenant can force the sale of real property. CCP § 872.210. The term for this is a partition action and is quite expensive. The right to seek a partition by a joint tenant is automatic unless the joint tenants have agreed to waive the right to seek a partition. Harrison v Domergue (1969) 274 CA2d 19.
10. Can a person hold other assets in joint tenancy?
Yes, bank accounts, automobiles, stocks, bonds and brokerage accounts are other types of assets that may be held in joint tenancy.
11. Is there a disadvantage for a married couple to hold property as joint tenants?
Yes, there is a significant tax disadvantage for a married couple to hold title as joint tenancy as opposed to community property.
Certain words used in everyday language have a specific legal meaning to them. That is, the word denotes a certain situation or a specific person. The word should not be used interchangeably with other words. For instance, I frequently hear the term "negligence" used in daily conversations. The term "negligence" has a very specific meaning to it. I will spare you the boring legal definition (I had to memorize it for the CA Bar Exam) but just know the word has a specific meaning to it.
In probate law, there are an assortment of terms that have a specific meaning. The beginning part of the California probate code is entirely devoted to defining various terms. For purposes of this post, I will focus on the word "heir."
California law defines an heir as “any person,
including the surviving spouse, who is entitled to take property of the
decedent by intestate succession under this code.” Prob C § 44. This translates
to the decedent’s next of kin who would inherit the decedent’s estate if they
did not write a will, trust, have a joint tenancy arrangement or designate
beneficiaries on various accounts. For example, I have an uncle who is single and does
not have any children nor any predeceased children with issue. Both his parents
and grandparents are deceased, and his sole sibling is deceased. My sister and
I, as his niece and nephew, would be considered his heirs under California’s
intestate succession laws. Prob C § 6402.
There are deadlines in life for everything. Administering an estate is no different. The following are some deadlines that apply to various estates. Failure to observe these deadline may result in penalties or liabilities for the offending party.This is not an exhaustive list of all responsibilities for reference.
- The custodian of the decedent's original will must
(1) lodge the original will with the clerk of the county where the decedent
resided at the time of death and (2) mail a copy of the will to the named
executor within 30 days of learning of the death. Prob C §8200.
- If the decedent had a probate estate worth $100,000
or less, a minimum of 40 days must elapse before an affidavit can be executed
and presented to a holder of the decedent's assets for recovery. Prob C §13100.
- When a trust becomes irrevocable or a change in
trustee of an irrevocable trust occurs, the trustee must serve notice to
various parties no later than 60 days after the occurrence of the event
requiring service of the notification, or 60 days after the trustee becomes
aware of the existence of a person entitled to receive notification if that
person was not known to the trustee at the time of the occurrence of the
triggering event. Prob C §16061.7
- A person receiving a 16061.7 notice has 120 days to
contest the trust from the date the notice is served on him or her, or 60 days
from the date when a copy of the terms of the trust is mailed or personally
delivered to the person during that 120-day period, whichever is later. Prob C
§16061.8.
- If the decedent received Medi-Cal or was the surviving
spouse of a person who received benefits, a Medi-Cal notice must be sent to the
California Department of Health Services within 90 days from the date of death
and must include a copy of the decedent's death certificate. Prob C §215
- Once a will has been admitted to probate, a petition
for revocation of probate must be filed within 120 days. Prob C §8270(a)
- If the decedent owned real property, a Preliminary
Change of Ownership Report (PCOR) must be filed within 150 days of the date of
death even if the transfer was through the medium of a trust. Rev & T C
§480(b).
- The estate tax return is due within 9 months after the date of
decedent's death. IRC §6075(a).
When selecting a successor trustee, many clients are often unsure whether or not their friends or family members have the requisite skills to be a competent trustee. The list of duties that are imposed on a trustee are lengthy and challenging. For example, a trustee owes a beneficiary a duty of loyalty, accounting, impartiality, etc. If the trustee, makes a mistake there are severe consequences, including removal. In light of this, many clients ask if there are professionals who handle being a trustee. The answer is yes.
In California, a professional fiduciary is a licensed individual who has been trained to execute the duties of a trustee. A professional fiduciary can also serve as a conservator, guardian or agent under durable power of attorney for healthcare or finances. In order to become licensed, a professional fiduciary basically needs to take an educational course, and then pass an exam and background check. http://www.fiduciary.ca.gov/licensees/faq.shtml.
A listing of professional fiduciaries can be found on
the Professional Fiduciary Association of California’s (PFAC) website at
http://www.pfac-pro.org.
The compensation rates for a professional fiduciary
are much lower than a corporate trustee but higher than a family member
trustee. A range from $100 - $150 per hour for the services of a professional
fiduciary would be reasonable.
Many people believe that they are entitled to an inheritance from their parents or next of kin. This is simply not true. A California
resident is free to disinherit their children, parents, nieces, nephews, etc.
The only individual who they cannot disinherit is, if applicable, their spouse.
The reason being is that each spouse only owns ½ of each community property
asset and therefore may not will more than they own. For instance, if husband and
wife purchase a home together after marriage and pay off the entire mortgage
with their joint earnings, but the husband attempts to will the entire house to
a third-party, the wife may void this transaction. Harris v Harris
(1962) 57 C2d 367.
Some jurisdictions outside the United States have what is called "forced heirship" where a relative can request a set aside of the decedent's estate. However, these forced heirship laws do not exist in California.
Still, if a person wishes to leave nothing to their children or to the maximum extent their spouse, they should do so in a precise fashion because there are laws that govern the omission of a child and spouse. Otherwise, a relative may inherit through intestate succession if no will, trust or beneficiary designation is made.
Many states have what is called common-law marriage. For reference, a common-law marriage is where two
individuals hold themselves out to the public as if they were married
for a specified amount of time despite the fact that they never went
through the formal marriage proposal, namely the acquisition of a
marriage license.
However, the state of California does not recognize common-law marriage.
The reason why this is significant is because California is a community property state. This means that marital assets are owned equally between the spouses. For example, husband earned $1,000 a week as a librarian, whereby his wife would be entitled to $500 of that paycheck. Since a common law marriage is not recognized under California law, a common law wife would not be afforded the same protections as a regular wife or spouse.
Still, it should be noted that a putative spouse is entitled to his or her share of quasi-marital property. See Prob C §§6500-6615; Estate of Hafner (1986) 184 CA3d 1371. A putative spouse is somebody who in good faith entered into a marital relationship with another person who was ineligible to marry. A putative spouse commonly arises where the ineligible spouse was previously married and had never legally dissolved the marriage.
The number of unmarried individuals living together, cohabitants, has increased tremendously over the years. In an analysis of the 2010 U.S. Census, Pew Research found that the number of unmarried cohabitants doubled since the 1990s. While the law in general affords cohabitants certain protections, domestic violence protection for example, estate planning law does not look very favorably upon unmarried cohabitants. The principal reason for this is because California's intestate succession laws pertain only to married couples and blood relatives. Prob C §§ 6401-6402. For reference, intestate succession is where a person passes away without a will and their estate is distributed to their next of kin.
The term synonymous with the “inheritance” of an unmarried cohabitant from the another cohabitant is “palimony.” The term palimony is derived from the seminal case on this issue, Marvin v Marvin (1976) 18 C3d 660.
The phrase "palimony" was coined by the girlfriend’s attorney in the case, Marvin Mitchelson. Yes, everybody in the case had the name “Marvin” apparently. In Marvin, actor Lee Marvin’s former live-in girlfriend, Michelle Marvin, claimed that she and Lee had “entered into an oral agreement that while the parties lived together they would combine their efforts and earnings and would share equally any and all property accumulated as a result of their efforts whether individual or combined.” She essentially asked for her community property rights in Lee’s earnings, namely ½ of the earnings Lee accumulated during their relationship. The California Supreme Court rejected Michelle’s community property claim because the couple was not married. Instead, the California Supreme Court said that Michelle needed to prove the existence of an enforceable contract to assert such a claim against Lee and the term “palimony” was born.
Consequently, palimony actions have been utilized in estate planning cases. Thus, in light of Marvin, unmarried cohabitants may provide for one another upon their death in a number of ways whether by will or trust, and due to Marvin, via contract. However, the key is that the couple take affirmative estate planning steps because the default rule, intestate succession, does not apply to unmarried cohabitants since they are not married.
The following illustration provides a glimpse of what could happen to the estate of an unmarried cohabitant. Of note, these characters are completely fiction. Each individual was the creation of my imagination which, at best, is very limited.
Cory and Cynthia were an unmarried cohabitating couple who resided in Sonora, CA, the county seat of Tuolumne County. Cory and Cynthia jointly purchased the home they lived in. The couples’ bank accounts were exclusively held in the sole name of each. Cory had a 401(k) retirement account from his former employer, a local lumber mill. Cynthia was a semi-retired florist who also had a 401(k) retirement account. To preoccupy his time, Cory opened a small sandwich shop, C’s Sandwiches. Cynthia worked occasionally at the sandwich shop.
One day, Cory was tragically killed in a hot air balloon accident. When Cory passed away, he did so without ever having written a will or trust. Cory’s heirs were his brother Bob and sister Sally. Thus, any property that fell under California’s intestate succession laws would not be distributed to Cynthia because she was not Cory’s next of kin. Rather, such property would be distributed equally to Bob and Sally.
Though the couple lacked a will or trust, the couple had made estate planning decisions prior to Cory’s passing. For example, the home the couple had purchased was held in joint tenancy. Thereby, Cynthia would be entitled to Cory’s 50% interest in the home regardless of the fact that she was not next of kin. Furthermore, Cory’s 50% interest that would pass to Cynthia would not be the subject of probate administration. Grothe v Cortlandt Corp. (1992) 11 CA4th 1313. Cynthia would merely have to file an affidavit of death of a joint tenant with the Tuolumne County Clerk Recorder in order to claim full ownership of the home. As for Cory’s 401(k) retirement account, Cory designated Cynthia as the beneficiary of this account. This allowed Cynthia to inherit Cory’s account regardless of the fact that she was not next of kin and she could do this transfer outside of probate administration as well. See Prob C § 5000. Next there was Cory’s bank account, which listed Cynthia as the pay-on-death beneficiary. Again, this P.O.D. clause granted Cynthia the ability to inherit Cory’s property regardless of their lack of familial relationship and could be done outside of the probate court. Prob C § 5000.
Finally, as for the sandwich shop, Cynthia claimed that she and Cory were partners in the business and as such, she should be entitled to 50% of the business. Cynthia asserted this claim through a Marvin action in Tuolumne County Superior Court, much to the dismay of Bob and Sally, the intestate heirs to the sandwich shop. Her evidence was that Cory had orally told her that they were partners and they equally shared the sandwich shop’s profits. Bob and Sally argued that Cynthia was merely an employee, rather than a partner and thus C’s Sandwiches was theirs, not Cynthia’s. Their evidence was the fact that no fictitious business name statement had been filed and the conduct of the parties did not indicate a partnership, in that Cory performed all the labor and bookkeeping while Cynthia worked only sporadically. Moreover, Bob and Sally disputed the veracity of Cory’s statement that he and Cynthia were partners in the business. Ultimately, the judge decided that Cynthia had presented a colorable Marvin action claim, but only after Cynthia had expended thousands of dollars in legal fees and spent months litigating this matter.
If given the opportunity to come to an agreement, whether orally or in writing, the easy solution is to make an oral agreement whereas the better solution is to come to a written agreement. First, an oral agreement is inherently difficult to prove. One party will naturally insist that an agreement was reached, while the other party will be inclined to deny the existence of such an agreement. This ultimately distills into the classic “he said, she said” conundrum. Legally speaking, oral agreements or directions in terms of estate planning can run the gamut of consequences. Depending upon the context, an oral agreement or direction may be unenforceable, enforceable or ambiguous. Although in almost all cases the result will be disastrous. The following are some situations in which oral statements come into play in regards to estate planning.
A transaction that attempts to sell real property or an interest therein is void unless in writing. CC §1624(a)(3). For example, if Jack Tripper wishes to gift to Marcy Darcy his interest in Greenacres, this transaction will need to be memorialized in writing, namely a deed. This elementary rule, known as the statute of frauds, is something that every law student learns during their first year. Moreover, it is bar exam season in California, the bar is offered at the end of every July, so I am sure that thousands of potential California attorneys have memorized this law as well. I know I did when I took the bar.
The creation of a joint tenancy in real property requires a written instrument. CC §683(a). Assume that John Tenant purchased a home before marriage. Later on, John married Joy Tenant. John wished that Joy would inherit the property should he predecease her. In order to do this, John would need to execute a written instrument conveying his interest to himself and Joy as joint tenants through a deed. Of note, there would be no property tax implications for this transfer. Rev & T C §62(f).
An oral bequest is void because a will must be in writing. Prob C § 6110. I have heard countless stories of alleged beneficiaries who thought they were cheated out of an inheritance because there was no record of a written will. Instead, the alleged beneficiary had been told by the person, while they were living, that they would inherit a piece of jewelry, furniture or a car when the person died. Disputes involving oral bequests usually pertain to items of sentiment value, such as a family heirloom as opposed to a substantial asset. Nonetheless, people are apt to fight over these objectively inexpensive items because of their emotional attachment to them.
A durable power of attorney must be in writing. Prob C §§4022, 4124. It is important to note the distinction between a durable power of attorney and a regular power of attorney. A durable power of attorney grants an agent the power to act on the principal’s behalf despite the principal’s incapacity. Whereas, a regular power of attorney will become ineffective on the account of the principal’s incapacity. For instance, if Peter executed a durable power of attorney and appointed Albert as his agent, Albert could act on Peter’s behalf if Peter ever lost the capacity to enter into contracts. Conversely, if Peter executed simply a power of attorney, then on Peter’s incapacity, Albert would lose his ability to contract on Peter’s behalf.
The following are examples where oral statements are enforceable in the context of estate planning.
Oral trusts are permitted in California. Estate of Heggstad (1993) 16 CA4th 943. By no means should a person ever consider creating a trust this way. The reason being is that oral trusts are prone to abuse, litigation, fraud and ambiguity.
A person may orally provide individual health care instructions. Prob C § 4670. This is quite peculiar on the surface because one would think that oral health care decisions would be ripe for manipulation or ignorance by sinister individuals. However, the intent behind this law is to provide isolated seniors with the opportunity to plan for future medical emergencies. However, I would be very surprised to see a health care facility make life-altering decisions based upon a patient’s oral directions. Instead, the health care facility most often relies on a written advance health care directive.
Even though one may not orally create a will, a person is permitted to enter into a contract to make a will. Prob C § 21700. In every will that I have written, I included a clause which states that the testator (the author of the will), has not entered into a will contract. The reason being is that the beneficiary of the will contract may sue the testator’s estate if the testator did not comply with the terms of the contract. Yes, even if death, somebody can theoretically hold you accountable for an agreement you entered into, albeit while you were alive. Although an oral will contract seems obscure, it does exist as illustrated by the following case. Stewart v Seward (2007) 148 CA4th 1513.
In early December 1990 a terminally ill Gowisea Koontz entered into an oral agreement with her spouse, Wilmer Koontz, on her death bed. Gowisea agreed that she would not execute a will disposing of her property and would not convert title of their home from joint tenancy to tenancy in common provided that Wilmer agree to execute a will leaving a ½ interest in the family home to Caroline Stewart, Gowisea's daughter and Wilmer's stepdaughter, and the other ½ interest to two grandchildren. This exchange, namely the oral agreement to make a will, was witnessed by several people. Gowisea later passed away on December 12, 1990, intestate. Following Gowisea's death, Wilmer executed a will leaving the entire home to the two grandchildren, leaving nothing to Caroline. Wilmer died on October 26, 2004.
Caroline eventually sued Wilmer’s estate for the inheritance she believed she was owed. Although her claim was denied on appeal due to a timing issue, this case illustrates the consequences of an oral will contract, namely the cost and the time involved. This case was appealed to the California Court of Appeal. To appeal a case from the trial level costs tens of thousands of dollars at a minimum according to attorney colleagues I know. Furthermore, litigation had not concluded until the breaching party, Wilmer, had been dead for 2 ½ years. In short, never make an oral will contract.
