When it comes to estate planning, people typically focus on the terms of a Last Will and Testament or a trust agreement to ensure that assets are distributed according to their wishes. While those estate planning tools are certainly powerful and important, do not overlook another powerful tool – title to your property. In California, the way you title jointly owned property can significantly affect how that property is transferred upon death. For individuals who co-own property with a spouse, partner, or other family member, holding title with rights of survivorship can serve as a simple and effective estate planning strategy. With that in mind, the Los Angeles attorneys at Schomer Estate & Wealth Advisors help you understand how using rights of survivorship in California can be an effective estate planning strategy.
What Is “Right of Survivorship”?
A right of survivorship is a legal concept that allows property to pass automatically to a surviving co-owner when the other co-owner dies. This happens without the need for probate, which can be time-consuming and costly. In California, property can be titled in joint tenancy with right of survivorship or as community property with right of survivorship, depending on the relationship between co-owners. When a property is held with right of survivorship, the surviving co-owner becomes the sole owner by operation of law. This transfer happens immediately upon the other owner’s death and requires only minimal documentation, such as a death certificate and an affidavit, to update the title.
How Is It Different from Other Forms of Ownership?
There are several ways to jointly own property in California, and the type of title you choose determines what happens to the property when one owner dies. Each option has specific advantages and implications. California options for titling jointly owned property include:
- Tenancy in Common: Tenancy in common allows two or more people to co-own property in equal or unequal shares. There is no right of survivorship, so each owner’s share passes to their heirs through a Will or trust, not to the surviving co-owner.
- Joint Tenancy with Right of Survivorship: JTWRS is a form of co-ownership where two or more individuals own equal shares, and the surviving owner automatically inherits the deceased’s share. This option allows the asset to bypass probate altogether, making it easier and simpler to transfer your legal interest in the asset.
- Community Property: This type of joint ownership is only available only to married couples or registered domestic partners in California. Each spouse owns a 50 percent interest, which can be transferred to someone else through a Will or trust.
- Community Property with Right of Survivorship: This option effectively combines the tax benefits of community property with the simplicity of survivorship. When one spouse dies, the other automatically inherits the entire property without probate.
Why Use Right of Survivorship in Your Estate Plan?
One of the most compelling reasons to hold property with the right of survivorship is avoiding probate. Probate can be expensive and time-consuming, particularly in California, where court fees and administrative costs can significantly reduce the value of an estate. Titling property with right of survivorship allows for immediate and efficient transfer of ownership, often without the need for an attorney or court supervision. It is also a strategy that provides clarity and certainty because the transfer happens automatically upon death, reducing the chance of disputes among heirs. Moreover, titling property with rights of survivorship ensures that your surviving spouse or co-owner continues to have uninterrupted use and control of the property. This can be particularly important for married couples or domestic partners. By titling property as community property with right of survivorship, they not only avoid probate but also take advantage of a step-up in basis for tax purposes. This means the entire property’s value is adjusted to its current market value upon the first spouse’s death, which can reduce capital gains taxes if the property is later sold.
Are There Disadvantages to Using Rights of Survivorship?
While holding property with the right of survivorship offers many benefits, it is not appropriate for every situation. For example, it may not be ideal if you wish to leave your share of the property to someone other than the co-owner. It also offers less flexibility than a revocable trust, particularly when it comes to complex family dynamics or blended families. Additionally, naming someone as a joint owner with right of survivorship gives that person equal control over the property during your lifetime. This means they can potentially sell or encumber the property without your consent, depending on how the title is held. For this reason, you should only enter into joint ownership with someone you fully trust and with whom you share aligned goals.
Do You Have Questions about Incorporating Rights of Survivorship into Your California Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you have additional questions about incorporating rights of survivorship into your California estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisorsby calling (310) 337-7696 to schedule an appointment.
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