Community Property with Right of Survivorship
-- Law Effective July 1, 2001--

If you’re married and own a home or other real estate in California, it may help to know about a new law that will become effective July 1, 2001.

Background
George and Barbara are married, and live and own a home in California. Their home has appreciated in value.

Joint Tenants. If George and Barbara own their home as joint tenants, they have created 50%-50% interests and a "right of survivorship". When one of them dies, the other (the survivor) receives title to the home outright (100%) by filing an Affidavit – Death of Joint Tenant with the County Recorder. This survivorship comes about regardless of what they say in their wills.

Community Property. Spouses (and only spouses) may own real estate as community property. Community property carries no automatic right of survivorship. If George and Barbara own their home as community property (without the effect of the new law), they have created 50%-50% interests, but without a right of survivorship. Each may pass on his/her share (50%) of the home to whomever they name in their will.

Capital Gains Taxes. Holding an appreciated home as community property may offer a capital gains tax advantage when compared to joint tenancy – when one spouse dies and the surviving spouse sells the home during his/her lifetime. See the capital gains tax example.

New Law: Community Property with Right of Survivorship
The new law provides for a right of survivorship for a married couple while owning a home or other real estate as community property. This would mean that when one spouse dies, the other spouse will own the home outright (assuming proper filing is done) and receive a "stepped-up basis" for the entire home (if it has appreciated in value) for capital gains tax purposes.

Couples owning appreciated real estate as joint tenants may want to use the new law. To do so, consult an attorney experienced in this area for the necessary paperwork. Typically, this would be a deed signed by the couple granting to themselves their home as community property with right of survivorship. The paperwork may be created on or after July 1, 2001.