Joint Tenancy? Community Property? which is better for tax reasons?

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etheran_IHB

etheran_IHB

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Which is better for a new buyer? Joint Tenancy? Community Property? Community Property with survivorship rights? What is better from a legal standpoint and for a tax standpoint?



Under the assumption that we are married and in California and if I passed away, I want my wife to get the best tax advantage so which one should I choose?



Can someone explain it in simple terms? I am reading this whole research report and it is so confusing. It also talks about creating a trust. What is the advantage of creating a trust? I guess it must be for tax reasons... Can anyone help?
 
<p>Do you have kids etheran? Could/would your estate be worth over seven figures in the end? I am a huge fan of living trusts and my home is "owned" by my wife's and my trust. The primary advantage to the trust is that it avoids the probate process, which can be timely and costly... There can be some tax advantages to living trusts as well if properly constructed.</p>

<p>I think any step-up in basis that your wife would get if you passed away would hold true if the home was held in a trust or as community property. A step-up in basis is what you want to achieve upon death as that would lower potential capital gains on future sale of the home. There are more expert in that area (awgee) than myself on this board that will hopefully confirm.</p>
 
<p>Joint Tenancy is usually seen as the easiest since the remaining spouse simply takes full possession of the property automatically. Community property is not something you establish. . .you actually have to opt out of it (property acquired during marriage is presumed to be community property). </p>

<p>Legally speaking, you want to avoid probate. That is no explicit instruction (will/trust) or transfer of property upon death. A trust is beneficial because you are basically disposing of your assets while you are living. You are instructing the world that where and to whom you want your stuff to go to. You are also appointing a "trustee" to make sure that your assets are distributed properly. </p>

<p>A living trust is nothing more than a holding position where you place your things (kinda like storage). It is only upon death that a trust is really important. It provides a roadmap as to your intent on where the assets should go. The Court leaves you alone and allows the asset distribution accordingly. There is also some creditor issues but that is more complicated.</p>
 
ipop is right. Even if jointly owned, you want your property held in your trust so as to receive the step up in basis for tax purposes. Other than that, the manner in which you hold is for legal purposes and that is out of my range of expertise.
 
My attorney has advised me to place all of my assets as: tenmagnet, sole and separate property. He mentioned it would protect me in the event I should encounter a gold-digger, which according to him are quite prevalent here in the OC.
 
Thank you everyone. I am hoping that one day my estate will exceed $1mm one day. I do not know what is a living trust and will look into it.



Anyways, at the end of the day, community property appears the way to go since you get the step in basis when I die.



However, can anyone explained to me what I got to worry about the probate problem if only I die? My wife just automatically gets the house right??
 
<p>You don't have to worry about probating any asset that is held as community property with survivorship right. If you and your wife take title to your home that way, she would just have to file a form or two to change title in the event of your death. She would get a stepped-up basis for your share in that case as well... </p>

<p>The trust advantages really kick in if you have kids, if both of you die, have other material assets not held as community property, want a healthcare directive, or have a larger estate. You can buy software that will make a simple revocable living trust or you can typically have an estate attorney draft one up for $1-2K.</p>
 
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