Questions About Trusts
Life Ins. Trusts
Restatement of Trust
Special Needs Trust
The Procrastination Page
529 Education Plans
Dying without a Will
Reading of the
Health Care Directives
Questions About Estate Planning
Tenancy in Common
Joint Tenancy in California
Joint tenancy is a way of avoiding probate simply by
putting the words "joint tenancy" in the title of an asset. But joint
tenancy can have drawbacks, as explained on this web page.
What is the right of survivorship?
When a joint tenant dies, his or her interest in the asset vests
in the surviving joint tenant or joint tenants. In other words,
if two people own real estate in joint tenancy, and one of them
dies, the surviving joint tenant then owns 100 percent of the
Does a will or trust have
any control over joint tenancy? If property is owned in joint tenancy,
the surviving joint tenant will receive the deceased joint tenant's
interest in the property, regardless of what that person's will
or trust says about the property. An exception would be if both joint tenants died
simultaneously, in which case their wills would control their
interest in the asset. For more information about wills, see
the Wills page or the
Wills page. For information about
another way of owning property, see the
Tenancy in Common page.
What are the capital gains problems
with joint tenancy? Joint tenancy is not recommended for
married couples who own assets that can increase in value, such
as a residence, because the surviving joint tenant will not receive
a "step-up" in cost basis to fair market value at the
date of death of the other joint tenant.
Cost basis is
used to determine capital gains. For many homeowners, the cost
basis is the price they paid for their home, plus any capital
improvements that have been made. The cost basis is subtracted
from the selling price to determine the capital gains. When a
married couple owns an appreciated asset as community property,
the surviving spouse will get a step-up in the cost basis to
the fair market value at the date of death of the other spouse.
(The amount of the step-up, however, is limited to $4.3 million for the
surviving spouse and $1.3 million for others.) In other words, if the surviving spouse has to sell the residence,
he or she is unlikely to have to pay any capital gains. But if
the residence is held in joint tenancy, it is more likely that
some capital gains tax may be due because only half of the property
receives a new basis. The federal tax reform bill passed in 1997
allows the surviving spouse a capital gains exclusion of $250,000,
but for some California residents, even this amount may not be
enough to prevent payment of capital gains tax when a residence
On the other hand, owning the property as "community
property" will give the surviving spouse a 100 percent step-up
in basis. However, this will change in 2010, if the current tax
bill remains in effect. See the
page for further information.
Advantages of joint tenancy:
1. Joint tenancy avoids probate. See
Page or the
Avoid Probate Page
for further information.
2. Title to real property can be cleared after a death by filing an
affidavit of death of joint tenant. The surviving joint tenant then
owns the property with no further proceedings or paperwork required.
Disadvantages of joint tenancy:
1. The step-up in basis is limited for married couples who own property in
2. The asset will usually be probated after the death of the
surviving joint tenant unless it is put into another joint tenancy
or a trust.
3. The tax planning advantages used in a living trust, such as
the creation of an exemption trust, are not possible for joint
tenancy property. See the Federal Estate Tax
page for information about estate taxes.
Community property with right of survivorship.
A similar form of ownership is called "community property
with right of survivorship," which allows the property to
be transferred to the surviving joint tenant without going through
probate. This form of ownership allows a 100 percent step-up in basis.