How Does Joint Property Ownership in California Work?
John McCullough, an attorney in Alexandria, Va., whose practice emphasizes estate, business, asset protection, charitable, retirement and financial planning. Jan. 10, 2003
Q: Dear John,
My partner and I live together and are registered as domestic partners in California. We have been together for more than five years and are planning to combine more of our finances. At this time, the house is titled only in her name. I have two questions.
First, what is the easiest way for my partner to pass the title of the house to me in case of her death or severe disability? And, second, will I enjoy any tax advantages if I buy property that I do not live in as my residence, or do I first need to have ownership in the house where I reside?
Thank you,
Linda
A: Dear Linda,
The easiest way for your partner to pass the title to the house to you in the event of her death would be to retitle the property as "joint tenants with rights of survivorship." When a property is titled as joint tenants with rights of survivorship and one of the joint tenants dies, the remaining joint tenant becomes the sole owner by law. This happens automatically without any action on your part.
Notwithstanding the fact that this is the easiest way to pass title, you must be careful not to inadvertently cause your partner to be liable for gift taxes. Under federal tax law, you may give up to $11,000 per year to anyone, including your partner, but any additional transfers above that amount are subject to the gift tax. Under current law, you are exempt from a federal estate tax as long as the estate is worth no more than $1 million.
Your tax adviser should be able to assist you in determining whether the title change makes sense for you and your partner from a tax perspective. He or she may suggest transferring $11,000 worth of value in the property to you annually until you have an equal percentage interest with your partner. This is assuming that you did not put up any of the funds for the purchase of the property.
Unfortunately, the new California domestic partners law, while providing many benefits for same-sex couples in California, has no impact on federal tax laws. As a result, the new law will not alleviate the tax concerns raised with respect to the transfer of property to a partner who has provided no consideration.
[Editor's note: Only Joint Tenants with Right of Survivorship enjoy this automatic passage of property upon the death of a partner. The enactment of AB25 did not create automatic or default inheritance rights for domestic partners. To ensure that your partner is protected in the event of your death, you must have a valid will.]
Sincerely,
John McCullough
McCullough is an attorney in Alexandria, Va., whose practice emphasizes estate, business, asset protection, charitable, retirement and financial planning.
Updated Jan. 10, 2003