If titled incorrectly:
- The home owner cannot control what happens to the property after s/he dies.
- The home owner’s heirs can lose the property to creditors, the government, or even an ex-spouse.
- The home owner’s heirs will have to pay capital gains tax on the sale of the property.
- The home (and the heirs) will have to endure the public, time-consuming, and very expensive probate process.
Common Ways to Hold Title
- Joint Tenancy (JT): Under JT, the owner who dies first cannot control what happens to the property after his or her death. JT ensures there will be a probate upon the death of the second joint tenant. Finally, the surviving joint tenant will pay capital gains taxes on one-half of the property after the death of the first joint tenant.
- Tenants in Common (TIC): A TIC does not provide any survivorship rights among the co-owners. When one tenant in common dies, that tenant’s interest in the property does not automatically pass to the surviving tenants in common. And each tenant’s interest does have to pass through probate upon each of their deaths. In California, a tenancy in common is presumed unless title is specifically taken in some other way.
- Community Property (CP): Possibly the most common way for married couples to own property, CP causes half of the property to be probated upon the first death, and the whole property to be probated upon the second death.
- Community Property with Right of Survivorship (CPw/ROS): Like joint tenancy, CPw/ROS is he-who-dies-last-wins situation, because only the surviving owner controls the disposition of the property upon death.
What eliminates all these potential problems? A Living Trust.
The best way to own your property is in a living trust.
- Owning property in a properly drafted and funded living trust avoids probate upon the death of both the initial and surviving spouses.
- Property received by heirs can be sold free of any capital gains tax and often avoids property tax reassessment.
- The trust will ensure the right people receive the property after the death of the owners.
- The property can be protected from creditors, predators, and even any future ex-spouses of the heirs.
Be one of the first five callers to mention this post and I’ll research and review the title of your primary residence free of charge. You’ll learn exactly how your title it is currently held, what that means to you and your loved ones, and how you can change the way you hold title if you’re not happy with the status quo.