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Learn about tax savings on joint tenancy
Joint tenant transfers may not trigger a reassessment
Joint tenancy
Prior to the predominance of family trusts, families used joint tenancy as a form of estate planning to transfer the real property from one generation to the next.
These types of transfers typically do not trigger a reassessment so families can keep their lower Proposition 13 factored base year value.
Whether a transfer results in a change in ownership or is excluded from reassessment is determined by how the joint tenancy was established between owners.
Joint tenancy is characterized by four unities:
Joint tenancies are co-ownership interests in real property. A joint tenancy must include these four unities:
- Unity of interest: The interest of each owner is equal.
- Unity of time: The interest of the owners is acquired at the same time.
- Unity of possession: The owners have the right of survivorship.
- Unity of title: The document must specify a joint tenancy vesting. (If a vesting is not specified, it is presumed to be a tenancy in common.)
Generally, if any one of the four unities is severed, the joint tenancy is destroyed and the owners become tenants in common.
When joint tenants acquire a real property, there is a change in ownership unless there are applicable exclusions. Joint tenants who add another joint tenant to the ownership of the property does not trigger a reassessment because the original joint tenants are still on title. This is a creation of joint tenancy where the original transferors are still on title. The added joint tenant is the other than original transferor.
When the 'other than original transferor' is removed from the joint tenancy, this is a reversion back to the original transferors. This reversion does not trigger a reassessment.
Joint tenancy is a form of ownership where individuals co-own real property. Therefore, a trust or a legal entity cannot be joint tenants or joint tenants with individuals. The vesting can only be tenants in common.
Filing Requirements
When recording the Grant Deed, Quitclaim deed, Affidavit of Death of Joint Tenant or Affidavit of Death of Trustee, complete the Preliminary Change of Ownership report, section A which provides additional information to the assessor for this type of transfer.
"Original transferor" and "other than original transferor"
- If the owners are A & B and A & B grants to A & B & C as joint tenants. A & B are the original transferors.
- C is the other than original transferor.
- All transferors must be transferees to establish original transferor status.
Adding your sibling to title with you - 50% change in ownership
Scenario: Your brother and you own a property as joint tenants 50-50, and your brother wants to go off title. You add your sister to title with you as joint tenant.
- This transfer will trigger a 50% change in ownership from your brother to your sister.
- Thus 50% is reassessed. You and your sister hold title as joint tenants. There is no original transferor status created.
Adding you to title - 100% change in ownership
Scenario: Your brother owns the property and adds you as a joint tenant. Therefore, you are 50% owner as a joint tenant on title. Your brother wants to go off title.
- When your brother goes off title, this transfer will trigger a 100% reassessment.
- When your brother added you on as a joint tenant, you acquired the "other than original transferor" status. Your brother acquired the "original transferor" status according to the joint tenancy rules.
- Your 50% was not reassessed when you were first added to title. When your brother went off title only the "other than original transferor" remained on title.
- Therefore, the deferred 50% and the new 50% is reassessed.