Joint tenancy or tenancy in common?

Question

About to close on residential home we plan on living in. Bought with my family’s assistance for down payment. My significant other (SO) and I are not legally married and we file taxes separately and overall have our finances separate, though we both contribute to our home and living expenses. This is partly because I don’t trust him to make good financial decisions. I want to make sure our son (10 years old) gets my part of the home if something happens to me, because I guess I don’t trust my SO will leave it to him.

So should we do a joint tenancy which gives right of survivorship to my SO or a tenancy in common? What are the downfall of a TIC?

And what if my son is still a child if he inherits and my SO wants to sell the home?

Thank you for any answers.

So should we do a joint tenancy which gives right of survivorship to my SO or a tenancy in common? What are the downfall of a TIC?

And what if my son is still a child if he inherits and my SO wants to sell the home?

Thank you for any answers.

Katie L. · Answer

@Angel Clark

Without knowing all the facts here I won't give an opinion but you've raised several issues in one short post.

estate plan: Do you have an estate plan in place at all?  A will?   Trust?  Is the value of your share of the home large enough to force you into probate in the event you died without a trust in place?

down payment: How did you structure the money from your family for the downpayment?  Is a gift tax return required?  Did you structure it as a loan such that mortgage interest can be deducted or do you consider it personal debt in which case interest payments are likely not deductible?

source of funds: did your SO contribute anything to the down payment?  If not, and you give him equal ownership, you could be considered as making a gift to him if he gets a larger share of the equity than what he contributed.  Joint tenancy will give him an equal 50% share whereas TIC you can take a percentage ownership ratably to what you contributed.

title: joint tenancy with rights of survivorship will likely give to your SO upon your death the full interest in the property which will then pass per HIS estate plan at his death.  if you want to pass your share to your son, you may want to do TIC and then leave your share in your estate plan to your son.  but as was mentioned, that means SO could sell his share or maybe mortgage it or partition for sale since he owns his percent and you own your percent.  might want to consider a co-ownership agreement and likely want to talk to an attorney.

minor child: you will want to have an estate plan in place naming a guardian of the estate of your son who would manage his assets in the event you died.  if your son is also the natural child of your SO then he may have power over your son's assets but you could try naming a guardian in your documents to try to get court oversight in the event you die before your son attains the age of 18.  you could also leave your assets to him in a trust and name a trustee that you trust and lay out specific provisions about when he is to receive income and assets and at what ages.  again, would likely need to talk to an attorney.

You also may want to have an agreement in place and keep good records between you and your SO to know who deducts expenses related to the home like mortgage interest and property taxes.  if you're splitting expenses equally, it would seem you would want this to go equally, but depending on how it is titled or whose SSN things are listed under, tax documents may show otherwise.  might be good to have things in writing if you don't trust him with his finances.

one other note, california is a community property state.  you are not married so this doesn't apply here yet at least but if you do get married, you will want to consult with an attorney to ensure separate property and community property are titled accurately before entering into the marriage.

Again, I don't know all the facts here and I'm only insinuating a sort of mistrust here based on your post but don't intend to presume any sort of relationship between you and your SO.

*none of this post is intended to create an attorney-client or CPA-client relationship.  none of this post is intended to be legal or professional advice or relied upon and the recipient and any readers should consult professional advice and counsel.

Dave Toelkes · Answer

From your comments, you want to title your home with your SO as tenants in common.  This makes your share of the property inheritable by your son, should you designate him as your beneficiary in your will.  Your will should also state who would become your child's guardian should you pass away while your son is still a minor.  If you should pass away and your SO wants to sell his share (half?) of the property, he can.  Whoever buys will become a tenant in common with your son.  Even while you both are still alive, either of you can sell your respective share of a tenancy in common property without the consent of the other.

These questions and any other legal issues you may have concerning your estate and the estate planning documents you need, should be addressed to an attorney with a civil law practice in your local area.  During your visit with the attorney, ask about power of attorney, health care power of attorney, living will and last will.  If you don't have any or all of these, you should get whatever is appropriate for your circumstances.

Tim Joyce · Answer

Thanks for the nod, @Nathan Platter.

I'll begin with the standard caveat that I am NOT licensed in California, and I know that their legal regime can be quite different in many aspects from MN (where I live now and studied law) and NY (where I grew up). This is something that *should* be pretty standard for CA estate planning and/or real estate attorneys, and someone may be able to give you a free consult that answers this question quickly.

In broad terms, if you and your SO held in a joint tenancy with right of survivorship, if one of you dies the other gets immediate possession of the entire property without going through probate (i.e., the legal proceedings that determine how property passes after you die). Broadly, a tenancy in common means that you each own undivided shares in the whole property, but those shares can pass to your heirs (something you don't get in JTWROS). It sounds like that is of particular concern to you. General downfalls of a TIC is that one person can bequest/will/sell their portion to someone else without the other person's consent. In a JTWROS, you generally have to petition a court for something called "partition" or else a forced sale - neither great options if your goal is to have a place to stay.

The inheritance issues are outside of my wheelhouse even in MN, unfortunately. I assume a legal guardian would manage your son's share of your estate until he's of legal age. Again, though, this is very high level and I sure don't know enough about CA law to claim to give any sort of expert advice here (sorry).

Angel Clark · Answer

I know this is a delayed response, but thank you to everyone who replied. Very helpful.  I will plan on working with an attorney to set up a trust and get more information regarding TIC or joint tenancy appropriate to our situation.

Bryan Zuetel · Answer

As a single person, holding title to a property as tenants in common will allow one to will or otherwise dispose of the property upon death in the manner desired and dictated by the person.  Joint tenancy by definition has a right of survivorship whereby the title to the property passes to the remaining joint tenants upon one joint tenant's death.

In California, technically, a minor child may inherit and hold property but cannot sell, borrow on, lease, or rent the property.  However, allowing a child to obtain title to a property is rarely, if ever, advisable.  Usually, the best avenue for a minor child to "inherit" property is through a trust, wherein the trustee can manage the property until the child reaches the age of 18.

Katie L. · Answer

@Angel Clark

Should have mentioned that if you need the names of attorneys or CPAs in San Diego I can shoot you some names but my contacts don't really extend past LA.

Nathan Platter · Answer

@Angel Clark,

I'm tagging @Tim Joyce because he knows Legal terms quite well.

Joint tenancy or tenancy in common?

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