TRUCKEE, Calif. — You know, there was something “fishy” about last week’s column. I just couldn’t put my finger on it. Not until close to a dozen of you pointed out my worst faux pas in 30 plus years of writing this column. (A handful of you vigorously objected to the “President Bush Is the Worst President in History” piece, but technically that was not a mistake — at least in my mind.) Marlon, as in Brando, is not spelled Marlin — that would be marlin the fish. Thanks for setting me straight.
A Better Mousetrap
Married couples have historically held title to real estate in California either as joint tenants or community property. Each has advantages and disadvantages.
Since 2001 there has been a better way to take title if you’re married. I have written about this before, but I keep seeing deeds with married couples owning as joint tenants or community property. So, once again, here is the straight scoop.
As everyone knows, if two people, including spouses, hold title as joint tenants, there is a so-called “right of survivorship,” which means when one dies, the property automatically transfers to the survivor — without the necessity of probating the estate. A simple Affidavit of Death of Joint Tenant is filed with the Recorder’s Office. While the advantage of joint tenancy is the avoidance of probate, the disadvantage is there is only a partial step-up in basis for the surviving spouse. There is a tax disadvantage for a married couple to hold title as joint tenants.
Sometimes parents and their children hold title as joint tenants, which can be tricky tax-wise, but it allows the property to be transferred to the kids — presuming the parents die first. No guarantee there.
Married couples may hold title as community property, where each individual may will their one-half of the community property to another person, but if they do not, their half of the community property goes to the surviving spouse. I could leave my half of our marital (community) property to my bride Marianne or I could leave it to our dog Nilla. Bad example.
The advantage of holding property as community property is there is a full step-up in basis — a tax benefit to the surviving spouse. The disadvantage of holding as community property is that a probate or some kind of court proceeding is necessary. Historically, most couples held title as community property.
Community Property with Right of Survivorship
Californians now have the benefit of both worlds. Married couples may hold title as “Community Property with Right of Survivorship.” That allows automatic transfer on the first spouse’s death — without probate — to the surviving spouse; and the survivor receives a favorable tax status under federal tax law. As a general rule, married couples should take title to their jointly owned California real estate, accumulated during marriage, as “Community Property with Right of Survivorship.” Remember that.
The community property status may be terminated prior to the death of either spouse, which would be appropriate in the event of a dissolution of marriage. On dissolution, couples normally will re-title their jointly-held real estate to tenants in common.
If you are married, consider working with a lawyer or title officer to re-record a deed to yourselves as “Community Property with Right of Survivorship.” This manner of holding title is not available for bank accounts and other assets.
Jim Porter is an attorney with Porter Simon, with offices in Truckee and Reno. He is a mediator and was the Governor's appointee to the Fair Political Practices Commission and McPherson Commission, both involving election law and the Political Reform Act. He may be reached at firstname.lastname@example.org or at the firm’s website www.portersimon.com.