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.
