California Property Titling for Married Couples
Email This Article Nathaniel RitchisonAugust 13th, 2010
Community vs. Joint with Right of Survivorship?
As the legal debate rages on in California about the right to marry, I wanted to address a common question in regards to titling of property, specifically the homes of married couples in California. Ask an attorney, accountant or financial professional how to title your home, and you’ll likely get the dreaded, “It depends.” While it truly does depend on your objectives and you should consult with an attorney prior to making any titling decisions, in California there are some potentially large tax differences between the two most common forms of ownership for married couples: community property with right of survivorship or joint tenants with right of survivorship.
While both forms of ownership transfer the decedent’s ownership share directly to the surviving spouse as an operation of the law thus avoiding costly probate, the similarities end at how they are treated for tax purposes. The main difference lies in how the property’s tax basis is affect at the passing of a spouse. When titling your home as community property with right of survivorship the surviving spouse receives a full step-up in basis on the property, while just the decedent’s share (50%) under joint with right of survivorship receives a step-up in basis. This can be especially costly for couples owning highly appreciated property or older couples that have lived in their home for many years.
Please consult with your tax and legal advisor prior to making any titling decisions. If you would like to review how your estate plan affects your overall financial plan, please call us and we’ll be happy to schedule a review.