Most of my estate planning clients own property, so I see a lot of Grant Deeds. Sometimes a married couple owns property as community property, and sometimes they own property as joint tenants. I’ve had several clients tell me they have no idea what the difference is between joint tenancy and community property, and they just picked the option their realtor recommended. Let me explain the difference and how it affects your ownership rights.
Community property is property that spouses share equally together. Everything a married person acquires during marriage (including their paycheck) is community property – the only exceptions are gifts, inheritances, and things acquired using separate property money. When a married person dies, all community property automatically goes to the surviving spouse. In a divorce, all community property is evenly split between the spouses. If a married person has debts, creditors can use community property assets to pay off the debt.
Joint tenancy is a little different, and it’s not just because you don’t have to be married to be joint tenants. If property is held in joint tenancy, the parties still hold equal ownership shares, but each party’s share is considered their separate property. This won’t change anything on death – the deceased joint tenant’s share still goes to the surviving joint tenant(s). But it does make a difference in divorce and bankruptcy cases. In these cases, soon-to-be ex-spouses and creditors are limited in what they can access. With divorcing spouses, the soon-to-be ex-spouse can only access their share of the joint tenancy property, not your share. And creditors could only access the debtor’s share of the property, not the share(s) belonging to the other joint tenant(s).
So is joint tenancy the better way to go? Not necessarily. A recent California Supreme Court case, In Re Brace, strongly suggests that spouses can’t take title as joint tenants unless they sign a statement that expressly makes the property separate property. Even if a married couple takes title as joint tenants, it’s still assumed to be community property unless that signed statement can be produced.
To summarize, community property and joint tenancy both involve holding equal ownership shares in property, but they will be treated differently in the event of a divorce or bankruptcy proceeding. Courts will assume that the couple intended it to be community property, even if the Grant Deed says joint tenancy, so it’s better to call it community property to avoid confusion. If a couple really wants it to be a joint tenancy, they’ll need to sign a statement confirming their intent.
If you have any questions about the above, or if you would like to talk to me about how you hold title to your property, you’re welcome to reach out to me at firstname.lastname@example.org.