The boyfriend and I bought a new vehicle over the weekend and it made me think about how creatives really need better legal help—and probably don’t even know when they need it. Yes, my mind does that—thinks about my clients while I’m doing something like car shopping. Whatever, the result is you get this blog post and hopefully are awakened to some legal issues you might be unaware of.
So, our story. This vehicle is the first major purchase between us as a couple. We’re not married but we do live together and are as committed as two people could be; still, as unmarrieds, the purchase would not be community property as it would here in California, by default, if we were married. That is, if you are in a community property state, like California, and you acquire an asset when you are married, that asset will be (usually—there are exceptions) community property of the spouses. Roughly speaking, each spouse owns the whole asset with the other spouse, equally. But, as unmarrieds, we didn’t have that option so we had to ask ourselves, “How should we title the new vehicle?” We could have held title jointly (i.e., both of our names on the title, as co-owners), which would mean we both would have to sign anything related to the vehicle (like upon selling it) and if we broke up, we’d have to negotiate the ownership; on the good side, if one of us died the other would automatically own the whole thing without going through probate (much like community property). Another option: one of us or the other could hold the title individually; but then if the owner dies, who gets it? The answer is it depends on whether there is a will but, whatever, it means probating the vehicle and that takes time and money. In California (and some other states), another option is naming a “transfer on death” (TOD) beneficiary. There, a vehicle can be titled in one party’s name with “TOD Beneficiary [name of person]” on the actual title, which means that, kind of like with joint ownership, on the death of the titled owner, the vehicle is automatically the property of the TOD beneficiary named. The risk? The titled owner could change the TOD beneficiary at any time without the consent of her/his/their partner (that could be an ugly surprise, later).
I’ll bet money most of you didn’t know these options, especially the last one. In fact, the dealership (a major one) we worked with didn’t even know about the TOD option. Anyway, with the exception of “community property” anyone—married or not—can choose any of those options, it just takes the right paperwork to make it legit. However, each option has advantages and disadvantages, so you need someone who has only your best interests in mind to facilitate. Speaking with an attorney can help you make the best choice for you.
Oh, and yes, we made the best choice for us.
That was just for a vehicle; if you are considering buying (or even refinancing) real estate, married or not, the options and ramifications are even more complex. Your realtor or mortgage person isn’t going to be able to explain your choices to you while specifically looking out for your best interests first (like lawyers are required to, by law). They’re going to have their own agendas to pursue. That can cost you or your partner lots of money—maybe not now, but eventually.
For example, here in California, there are property tax ramifications for transfers to non-spouses that might be eliminated with proper planning and paperwork. That is, you can add someone to your title (in certain ways) without a re-assessment, but if the original owner dies, then generally there will be a reassessment for property tax purposes. Same if you don’t add your partner to the title and then die, leaving the property to him/her/them. Imagine thinking you’ve taken care of your beloved by naming him as the inheritor of your house, only to have him hit with a massive and unaffordable increase in property tax when he does inherit!
Look, Adulting can be a pain in the ass. Lawyers can actually make it much easier. When you are considering combining homes, buying assets, or other big life choices like getting married, talk with a lawyer first to make sure you do it the best way possible.