Married couples in San Diego often hold title to their real and personal property as “joint tenants.” Joint tenancy carries with it the right of survivorship in the surviving spouse upon the death of the first spouse to die.
Such a means of taking title does, indeed, result in the surviving joint tenant receiving full title to the property. This transfer of full title happens without an expensive and time-consuming probate administration of the estate of the first spouse to die. Holding title as joint tenants is thus an efficient means of passing title.
On the other hand, here are some negatives:
Joint Tenancy and Probate Administration
If you die together, you still must have a will or trust in place to indicate to whom your property should go. If you have neither a will nor trust, then a probate administration will be required. Then, who actually receives your property will be determined by the laws of intestacy. In this case, your property may go to a person or persons whom you had no intention of receiving your property. Further, if you die leaving only a will, probate will still be required, because the law generally requires that wills be probated.
Also, the same type of survivorship problem may arise following the death of the surviving joint tenant. If the survivor of you dies without placing the property in a trust, the survivor’s estate will generally require a probate if the value of the estate exceeds $166,250.
Joint Tenancy and Tax Liability
On the death of the first of you, only the decedent’s one-half (1/2) interest in the property will receive a “step-up” in basis for income tax purposes. This could result in a greater income tax liability should the surviving spouse decide to sell the property.
Fortunately, California law gives you an option to joint tenancy while retaining the joint tenancy’s survivorship benefit. A husband and wife can now take title to their real property as “husband and wife as community property with right of survivorship.” Under this law, the basis in both spouses’ half interest is “stepped-up” to the value of the property at the time of death of the first spouse to die. This will minimize any income tax liability should the surviving spouse decide to sell the property.
The above statements are not to be taken as legal advice for the reader’s particular situation.