What is Vesting and How Should I Take Title When Buying a Property in California?

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Vesting and How to Take Title by myCAREexpert
Vesting and How to Take Title by myCAREexpert

Vesting for real property can have important legal and financial implications and can affect an owner’s interest, control, or transferability of the property.

When a title deed is written for real property, ownership is usually described using the name of the owner(s) and a clarifying legal description.  This is known as “vesting” or “taking title”.  When preparing to purchase a property, it is important to understand the different ways of taking title and how it impacts your ownership.  The following definitions are common types of vesting and are intended as an informational overview only.  Consumers should not rely on these as legal definitions and the author recommends consulting legal and financial professionals to carefully consider titling decisions prior to closing.

Common Ways to Hold Title

The most common ways to hold title involve sole ownership, co-ownership, and ownership by an entity.

Sole Ownership

Sole ownership occurs when there is only one owner to a particular piece of property.  The vesting description will accompany a clarifying descriptor such as “single”, “married”, “unmarried”, or “widow”.

1.     A single woman/man, an unmarried woman/man, or a Widow/Widower

A man or woman who is not legally married or in a domestic partnership

Ex. “Jane Buyer, a single woman” or “Joe Buyer, a single man” or “Jane Buyer, an unmarried woman” or “Joe Buyer, a widower”, etc.

2.     A married woman/man, or a domestic partner, and her/his sole and separate property

A married woman/man or domestic partner acquiring property in her/his name alone

Ex. “Jane Buyer, a married woman” or “Joe Buyer, registered domestic partner”

Co-Ownership

Co-ownership occurs when title to a particular property is held by two or more owners.  Co-owners should be especially diligent in their review of vesting options as the decision can impact your interest, control, and/or transferability.

1.     Community Property

Property owned by a married couple or domestic partners is called community property.  In California, real property conveyed to a married person or domestic partner is presumed to be community property unless otherwise stated.  Since all such property is owned equally, both parties must sign all agreements and documents to transfer the property or use the property as security for a loan; however, each owner has the right to dispose of her/his half of the community property by will.

Ex. “Jane and Joe Buyer, husband and wife, as community property” or “Jane Buyer and Sally Homebuyer, married couple, as community property”

2.     Community Property with Right of Survivorship

As implied in the title, community property with right of survivorship shares the characteristics of community property, with an important additional benefit of the right of survivorship.  Upon the death of an owner, the survivor will automatically inherit full interest in the property.

Ex. “Jane and Joe Buyer, husband and wife, as community property with right of survivorship” or “Joe Buyer and Bill Homebuyer, married couple, as community property with right of survivorship” or “Jane Buyer and Joe Buyer, registered domestic partners, as community property with right of survivorship”

3.     Joint Tenancy

Joint tenancy is a type of vesting that occurs between two or more owners of a particular property.  Each owner will have an equal interest in the property with the right of survivorship.  To establish a joint tenancy, title must be acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate.  When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant(s).  Joint tenancy is not subject to disposition by will.

Ex. “Joe Buyer, a married man, and Bill Homebuyer, an unmarried man, as joint tenants” or “Jane Buyer, a widow, and Joe Buyer, a married man, and Sally Homebuyer, a single woman, as joint tenants”

4.     Tenancy in Common

If your co-ownership arrangement is a little more complicated, perhaps with disproportional interests in a particular property, then you might consider tenancy in common.  Tenancy in common is a form of vesting title to property owned by two or more individuals in undivided fractional interests.  These fractional interests may be unequal in quantity or duration and may arise at different times.  Each tenant in common owns a share of the property, is entitled to a comparable portion of the income of the property, and must bear an equivalent share of the expenses.  Each co-tenant may sell, lease or will his/her own share of the property without needing approval from the other tenants in common.

Ex. “Jane Buyer, a single woman, as to an undivided ¾ interest and Joe Homebuyer, an unmarried man, as to an undivided ¼ interest” or “Joe Buyer, a married man, as to an undivided 1/3 interest, and Bill Homebuyer, an unmarried man, as to an undivided ¼ interest, and Jane Buyer, an unmarried woman, as to an undivided ¼ interest”

Entity

In some cases, real estate can be held by company or entity legally capable of acquiring title.  When purchasing a property with an entity, required documents may include corporate articles or bylaws, partnership agreements, operating agreements, etc., to verify the legal capacity of the entity to purchase, sell, and/or hold real estate.  Consult with your legal and financial professionals to determine if your entity is setup to deal in real estate.

1.     Corporation

A corporation is a legal entity created under state law consisting of one or more shareholders.

2.     Partnership

A partnership is an association of two or more persons who carry on a business for profit as co-owners.

3.     Trustees of a Trust

While a trust is generally not an entity that can hold title on its own, title can be vested in the trustee of the trust.  A Trust is an agreement where property in the trust is managed and transferred by a trustee for the benefit of the people specified in the trust agreement, called the beneficiaries.

4.     Limited Liability Company (LLC)

A limited liability company is a legal entity similar to both the corporation and the partnership.  The operating agreement of your LLC will determine how the LLC functions are taxed.

Vesting can have real legal and financial consequences.  It is recommended that you speak with a licensed legal or financial advisor when making decisions regarding your estate.

  • in the state of California, both married couples and domestic partnerships can consist of either same sex or heterosexual couples.
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