Mrs. Riddle was reviewing her will and found that her home
was held in joint tenancy with her husband. She requested that the
joint tenancy be terminated so she could put the property in her
will.
Property held in joint tenancy automatically
transfers to the surviving owners upon death. It cannot be put into a
will.
Mrs. Riddle essentially sold her interest in the property
to herself.
You can sell an interest in a joint tenancy while
you are alive. If one partner sells an interest in a joint tenancy,
then the joint tenancy is broken and becomes a tenancy in
common. An interest in a tenancy in common does not transfer
to the other partner upon death and can be placed in a will.
In order to have a joint tenancy, all the
partners must have the same four things in common: time, title, interest
and possession. If one of those is broken, the property becomes a tenancy
in common. By selling the property to herself, Mrs. Riddle was
trying to make it appear that she and her husband acquired the property
at different times. That breaks one of the four unities required
for joint tenancy.
Mrs. Riddle died and Mr. Riddle challenged the will.
The Trial Court found for Mr. Riddle, and gave him title
to the property. Harmon (Mrs. Riddle's executrix) appealed.
The Trial Court found that in order to break a joint
tenancy, you typically had to use a straw man. Historically,
you had to actually sell your interest to a friend for a nominal fee, who
would then immediately sell that interest back to you. There is no historical
precedent for selling the property to yourself.
The Appellate Court reversed.
The Appellate Court looked at a bunch of cases where
people had used loopholes to destroy joint tenancies. The Court
reasoned that since loopholes existed, and the original doctrine was
based on archaic legal principles anyway, there was no reason not to
change the common law and allow joint tenancies to be broken
without the need for a straw man or other loophole.
You always had the right to sever a joint tenancy
by selling your interest, so why can't you sever it in other ways too?
California's Legislature had passed a Statute saying
that you could create a joint tenancy without the
requirement of a straw man.
The new rule (in California anyway) is that a joint
tenancy can be broken unilaterally without the requirement of a
fictional transfer through a straw man.
A question still left to be resolved is whether there is a
requirement for one partner to notify the other partners of the
severance. For example, what would have happened if Mrs. Riddle wrote out
a document selling her interest to herself, didn't tell anyone, and Mr.
Riddle died first? Since Mr. Riddle (and everyone else besides Mrs. Riddle) believed that
a joint tenancy was still in effect, his property interest would
have automatically transferred to Mrs. Riddle, even though she was not
technically entitled to it.
Lack of notification requirements makes it easy to commit
fraud by keeping the severance a secret from the other partners!
Of course, the change in status must be reported to the
Recorder of Deeds (for tax purposes), so the other joint owners could
always periodically check to see if the status has changed.
