A married couple buys their first house, and perhaps over the years, bigger houses with all the trimmings suitable for raising a family. What is the significance of how they hold title on their grant deeds? The short answer is that there are estate planning and tax consequences in how title is held.
If the couple (or an individual for that matter) has a revocable living trust, they want title to vest in their names as trustees of the trust. This will ensure that the real property will not be subject to probate. Make sure the title company is aware you have a trust when an escrow account is established and provide a copy to the escrow officer. The title company will prepare the deed with title vested in the trust.
If the couple does not have a revocable living trust, title may be held in at least three different forms: (1) in joint tenancy, (2) in community property and (3) a hybrid known as in community property as joint tenants.
Contact a Roseville estate planning attorney of NewPoint Law Group, LLP if you have questions on the difference between a revocable living trust and an irrevocable living trust.
A unique feature of holding title in joint tenancy is the right of survivorship. This means that property will automatically transfer to the surviving co-owner, thus avoiding probate. The surviving joint tenant co-owner may vest title in his/her name by signing and recording an affidavit of death of joint tenant. Thus, for married couples, holding title in joint tenancy is attractive because the surviving spouse acquires title without the need for probate of the estate of the predeceased spouse. Holding title as joint tenants is the most common form of joint ownership among married couples.
Another form of title is for the couple to hold title in their names in community property. In this form of title, the couple shares ownership as tenants in common. There is an advantage and a disadvantage to a couple holding title in community property. The advantage is that there is a step-up in basis for tax purposes to benefit the surviving spouse which can result in tax savings. The disadvantage is that there may be a need to probate the estate of the pre-deceased spouse, or file what is referred to as a Spousal Property Petition, an abbreviated version of a probate.
Community Property as Joint Tenants
A third form of title is a hybrid of the above two forms of title—community property as joint tenants. This form of title provides the advantages of the right of survivorship in joint tenancy, i.e., no probate, with the perks of community property, i.e., a step-up in basis to reduce future tax liabilities.
Our Roseville Estate Planning Attorneys Can Look into Your Legal Matter
In summary, we recommend a title vest in your revocable living trust if you own real property valued in excess of $150,000. Alternatively, for married couples, title held in community property as joint tenants is recommended to achieve probate avoidance and the tax advantages of community property. Contact a Roseville estate planning lawyer of NewPoint Law Group, LLP today by calling 800-358-0305 today.