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Married Couples in California Have a New Way to Hold Title to Their Property

Beginning July 1, 2001---"Community property with the right of survivorship" combines some of the best features of the other forms married couples may use to hold title to property in California. While this new form of title will be useful for many married couples, it will not be appropriate for all couples.

For example, if spouses wish to leave property at death to people other than one another, such as to children from a prior marriage, this form of title would not be suitable. Likewise, if married couples have a revocable living trust that contains estate tax saving features, this form of title would not work and could actually harm the estate plan. If you already have an estate plan in place, you should certainly consult with your estate-planning advisor before making a change to the title or characterization of your property.

Traditionally, spouses could hold property together in one of three ways:

  • Tenancy in Common
  • Joint Tenancy
  • Community Property

    With community property with right of survivorship, the favorable characteristics of joint tenancy and of community property are combined. As with traditional community property, on the death of the first spouse, both halves of the community property receive a step-up in income tax basis, which is beneficial for capital gains tax purposes. This is in contrast to joint tenancy, where only 1/2 of the property receives a step-up in basis. As with joint tenancy, on the death of the first spouse, the deceased spouse's interest in the property passes to the surviving spouse by operation of law, with only the need to record a simple affidavit to actually remove the deceased spouse from title. The inconvenience of the spousal property petition, required with traditional community property, is eliminated.