How Should My Spouse and I Hold Title To Our Property?

Traditionally, married couples could take title to a newly purchased home or other property, either as joint tenants or as community property. Now spouses have another alternative when taking title to property that combines the benefits of joint tenancy and community property.

California law provides married couples the option of taking title to property as "community property with right of survivorship." This form of title provides the probate avoidance benefits of joint tenancy and the income tax benefits of the community property form of title.

Most couples choose the option of joint tenancy when taking title to property because it allows property to pass to a surviving spouse without administration in probate.

Couples who hold title as community property do not avoid probate, but do receive income tax benefits joint tenants are not entitled to by law. Holding title as community property allows for a "step up" in basis on the surviving spouse's half of the property as well as on the decedent's half of the property. Therefore, if a spouse decided to sell property after the other spouse's death, the surviving spouse would likely pay a higher tax on their half of the property that did not get a step up in basis.

A combined community property with right of survivorship title, allows couple the benefits of both types of title. Spouses can still have the probate avoidance benefits of joint tenancy but can also take advantage of the tax benefits of a community property title.

Of course, the best way to avoid probate and unnecessary tax consequences upon the death of a spouse is to have a revocable living trust. Property held in a living trust does not require administration in probate on the death of either or both spouses and can get a step up in basis on both halves of the property. In most cases, estate taxes can also be reduced or avoided altogether.