The main benefit of this new way of holding title is as follows. Primarily, the benefit of community property for a husband and wife allows that if one of the spouses dies, and leaves his/her half to the other person, the entire property would be revalued for the purpose of basis to the value of the property at the time of death.
So if they had purchased it for $10,000 and at the time of death, the value was $100,000 the decedents portion of the property could be inherited by the other person, and the entire property would be revalued at $100,000 for tax basis purposes. BUT – probate may be involved.
With Community Property with the Right of Survivorship, you get the best of both worlds. There is automatic survivorship without the need to probate AND the entire property is stepped up in basis value. This can become significant for estate planning because you not only avoid the cost of probate, but also, since the capital gains are based on the difference between basis and sales price – having a much higher basis can create significant tax savings.
If you already hold your property as joint tenants – fear not – it’s very simple to deed the property, from the owners in joint tenancy, back to yourselves as owners in community property with right of survivorship.
Hope you find this information helpful!
Your referral is much appreciated if you know someone who wants to be protected in the future should they need access to funds in their pocket, to up to $1.5M during health threats such as cancer,stroke or disability. We call these living benefits , now added free at no cost with their investment-index-strategy in an IUL with no market risk and tax free. Liquidity any time, in form of loan without returning it but must maintain 10% of the cash accumulation to be tax free (IRS code 7702).