As a graduation present, your client purchases her son a home. Although the plan was for the son to live there alone, the client and her son take title as joint tenants. Years later, your client remarries and asks you to convey her interest in the house to her new husband’s children on her death. What do you do? Whatever instrument you choose, be sure to sever the joint tenancy!
A key feature of joint tenancies is that each joint tenant has a right of survivorship. CC §683(a). Consequently, when a joint tenant dies, his or her interest passes by law to the surviving tenant. As a result, the interest doesn’t pass to the decedent’s chosen beneficiaries and isn’t subject to administration of the decedent’s estate. See Grothe v Cortlandt Corp. (1992) 11 CA4th 1313, 1317.
In particular, a will or revocable transfer on death deed will be ineffective in conveying a joint tenancy interest absent severance. Although there are some questions as to the effect on a joint tenancy interest transferred into a trust, the best practice is to first sever the joint tenancy before executing a deed transferring the interest into the trust.
Luckily for your client, however, joint tenancies can be unilaterally severed. One joint tenant may sever his or her own interest in the joint tenancy, without the consent of the other joint tenants, by doing any of the following in writing (CC §683.2(a)):
- Deeding the joint tenant interest to a third person (even if that person is a “straw person,” required by pre-agreement to convey title back to the joint tenant);
- Executing a written instrument with intent to sever (which includes a deed to transfer the joint tenancy interest to himself or herself); or
- Declaring the severance in writing.
Note, however, that the severance isn’t effective until the written instrument is recorded in the county where the property is located, sometime before the death of the severing tenant. The instrument can only be recorded after the severing tenant’s death, up to seven days, when the instrument was executed no more than three days before the severing tenant’s death. CC §683.2(c).
For in-depth coverage of the intersection of real property ownership and estate planning, including thorough discussions of tax implications, check out CEB’s brand new title Real Property Ownership and Taxation. For a holistic overview of the estate planning process, including economic and noneconomic considerations, turn to CEB’s California Estate Planning.
Other CEBblog™ posts you may find useful:
- Estate Planning Is Not Just for the Rich and Famous
- Joint Tenancy Transfers in Trust May Avoid Reassessment—But Not For Much Longer
- Cohabitating Couples Need Clear Agreements
© The Regents of the University of California, 2017. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.