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Vesting:  Ways to Hold Title in California


What is Vesting?

Vesting is how someone holds title to property. There are several options depending on whether you’re taking title as an individual, couple, or legal entity. Under the law, a right or interest in property “vests” when it is secured (recorded).

Why is Vesting Important?

How you hold title to real property affects your legal right to sell or refinance, as well as rights and taxes under inheritance. Therefore, to protect your family, heirs, and beneficiaries, careful consideration should be taken when choosing how you hold title. It’s also good to remember that laws and your financial situation will change over time, so you might want to update your vesting in the future.

Common Legal Entity Options 

  • LLC: Limited Liability Companies can be single or multi- member owned. Taxation of profits and losses are “passed through” to the owners (the LLC isn’t taxed unless it chooses to be), and it protects assets by limiting the owners’ personal liability. These benefits make LLCs a popular choice for owning rental properties, but they also have their downsides, including annual state licensing fees.

  • Corporation: Owning property through a corporation also offers limited liability protection: shareholders (owners) are typically not personally responsible for business debts and liabilities, and their losses are limited to the amount of money they invest in the corporation. However, failing to follow corporate formalities and obligations (such as adopting bylaws, issuing stock, holding regular directors meetings, filing annual reports, paying annual fees, etc.) can allow plaintiffs to “pierce the corporate veil,” thereby leading to personal liability of the shareholders.

  • Both C-Corps and S-Corps are created by filing formation paperwork with the state, but are treated differently for federal income tax purposes. Please consult a tax advisor if you need help deciding.

Options for Individuals and Couples

  • Single, Unmarried, Widow/Widower: All of these are options for individuals. “Single” means you’ve never been married, whereas “unmarried” means you were previously married and are now single (either through divorce or death). If your spouse died, you also have the option of choosing “widow” or “widower” instead of “unmarried”, but these terms aren’t commonly used in modern vesting.

  • Married as Sole and Separate Property: This option is used if the property is owned by someone who is married, but their spouse doesn't have any community property rights to the title (e.g., the property was inherited, the spouse has signed a deed to relinquish their rights, etc.). If the property was inherited and an Interspousal Transfer Deed hasn’t been signed, an escrow company may require the spouse to sign one to guarantee clear title before completing any future transactions.

  • Tenants-in-Common: This option is available when there are two or more owners, but ownership interests do not have to be equal (unlike joint tenancy). However, even if the ownership is unequal, each owner has equal right to possess the whole property. There’s also no right of survivorship by co-owners, so your portion of the property passes to your beneficiaries upon your death.

  • Joint Tenants: This option is available when there are two or more owners. The main benefit of joint tenancy is that when one owner dies, their portion passes directly to the surviving co-owner(s) without going through probate. Unlike community property, the owners don’t need to be a couple. However, joint tenancy requires that all owners have equal shares (one owner can’t have a larger percentage than the others).

  • Community Property: This option is only available to married couples and registered domestic partnerships. It gives the surviving spouse/partner the tax advantage of receiving a “stepped-up basis” on the entire property (instead of only on the deceased spouse’s half of the property, which is the stepped-up basis for properties held in joint tenancy). Stepped-up basis is the raising of the cost basis to the market value at the date of death, thereby minimizing the capital gains taxes owed if the asset is later sold. It’s important to note that although California recognizes registered domestic partnerships, federal law only recognizes married couples, so only married couples will be able to claim the higher stepped-up basis on their federal taxes.

  • Community Property With Right of Survivorship: Adding “with right of survivorship” gives married couples and registered domestic partnerships all the tax advantages of community property while also incorporating the automatic inheritance rights of joint tenancy. Spouses who own property as “community property” (without the “survivorship” vesting) can Will their half to someone other than the surviving spouse.

  • Revocable Trust: Vesting title in a living trust allows you (as the Trustee) to have full control of your property during your lifetime, then pass your property and other assets to your beneficiaries upon death without needing to go through probate. This option is available for both individuals and couples.

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Additional Services

  • Mobile Notary: Price depends on location. One complementary service offered within 40 minutes drive of Rohnert Park, CA.

  • Recording: Mailing your documents for recoding is included at no extra cost. For faster processing, e-recording service is available for most California counties (extra fees apply).

  • Rush: Expedited document preparation available upon request (extra fees apply).

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