Noelle Minto: I’m often asked by individuals how they should hold title to their real property.
A lot of people have a misconception of what various title-holding manners will do for them. Some of the most common mistakes I see are individuals saying they wish to hold the title as a joint tenant, thinking that they’re getting around doing estate planning documents, and making it convenient for the other joint tenant in the event of death. However, while some of that might be true, a major issue with holding property in joint tenancy with a spouse is that when one spouse dies, only half of that property will be stepped up at death.
Death and Property Title Issues
When someone passes away, we are allowed to get a step up in basis on the assets that we hold in our name when we die. So rather than holding property in trust as Community Property, where you get a complete step up on both deaths, you will only get a step up in the value of the property to the current market value with half of the property when held in joint tenancy with your spouse.
Another issue is individuals who will put their children on title as joint tenants, and they think they’re doing this to make it convenient for the family. But guess what, that inheriting family member who was on as joint tenant just for convenience, all of a sudden is 100% legal owner of that property. If that’s not the intent, that’s going to cause family discord and maybe even litigation amongst family members. It’s essential to evaluate how you’re currently holding the title.
There are laws out there that really disallow the tax benefit of holding property as joint tenants when looking to get that step-up in basis. As many of us in the state of California are looking to receive as we have significant appreciation in property values from the time we purchase to the time we pass.
To assess your case, make an appointment with our attorneys at either location; Riverside or Tustin, California.