Recently married and have no idea how home buying works when you are legally doing it with someone else? Don’t worry, you aren’t the only one! We are here to answer your questions on the ways you can hold title as a married couple.
First, we explain the different ways you can hold title as a married couple and then we drop into the burning questions you might have about it all!
Let’s get started!
Married couples typically have three options to take title to their community property real estate, which allows for the title of the property to be in both names of the couple.
- Community Property
- Joint Tenancy
- Community Property With Right Of Survivorship
Let’s look at all these different options!
1. Community Property Title
Only married couples can hold this form of title. Each person is listed in the title with 50% ownership and is able to choose who gets their half upon death. (It does not automatically transfer to spouse)
More often than not, they leave their half of the title to their surviving spouse. This form of a title is highly beneficial to married couples, but to what degree depends on if the estate value outweighs the associated cost discussed below.
Advantages
- Tax advantage: This benefits the surviving spouse in that they receive a step-up in basis.
Disadvantages
- Probate: A probate or similar proceeding is necessary to transfer title to surviving spouse. This can get very expensive because the greater the value of an estate the higher the value.
2. Joint Tenancy
This is when two or more people, including but not exclusive to spouses, are on the title in this form of titleship known as joint tenancy.
Advantages
- Right of survivorship (No probate!): If one title holder dies, the property automatically transfer to the survivor without having to go through probate.
Disadvantages
- Tax disadvantage: There is only a partial step-up in basis for the surviving spouse, so there is a tax disadvantage for married couples.
3. Community Property With Right Of Survivorship (CPWROS)
Only married couples can use this form of title in community property states like California. This is a very popular method for married couples because it really protects spouses in the case of titles.
Advantages
- Right of survivorship (No probate!): If one title holder dies, the property automatically transfers to the survivor without having to go through probate.
- Capital Gains Step: Not just the half belonging to the deceased spouse, but the entire property will receive a step on basis upon the first title owner’s death. This allows for a double step if the remaining spouse holds the property until death.
Disadvantages
- Worst Case Scenario Probate: There is only a partial step up in basis for the surviving spouse, so there is a tax disadvantage for married couples.
- Capital Gain Tax: If the surviving spouse wants to sell their asset, they have to pay capital gains tax.
Now that we have gone through all the different ways to hold title as a married couple, let’s look at some frequently asked questions about all the options.
What Is A Probate?
A probate is a formal proceeding to establish the validity of a deceased person’s will.
When Does An Estate Have To Be Probate?
Not all estates require probate because estates of minimal value than it can almost undoubtedly dodge the probate costs. This is due to the probate process not being required for them by law.
A more simply, smooth-running process is often put in place to accommodate them even if a probate is required. Only estates that top a value threshold must go through the probate process entirely.
Probate is required only when there is no other way of transferring the asset to the heirs or devisees of the estate.
Why Is A Probate So Expensive?
Probates are expensive because of the fees associated with them. Here’s a look at the fees you will most likely see:
- Court fees. These fees are dependent on state laws, but can range anywhere between a few hundred dollars to over a thousand dollars. It depends on the complexity of the estate and how many forms must be filed. (More files=More money)
- Appraisal & Business valuation fees. Appraisal fees for personal property can range from a few hundred dollars to a few thousand. Business valuation fees can run into several thousand.
- Property/Bond fees. A personal representative or executor will be tasked with paying for and posting a bond in an amount determined by the probate judge before they can be appointed. The estate usually pays for this and the bond can be waived in the dying party’s last will.
- Miscellaneous fees. These fees range from the cost of postage to the storing and shipping of personal property. Think of all the logistic costs that will be acquired throughout this process.
What Is An Appraisal?
An appraisal is the process of developing an opinion of value.
How Do I Transfer Property Of Ownership?
If you are refinancing loans or taking title property you have plans of sharing with your spouse be sure that the deed reads after your name: Community Property with Right of Survivorship. It allows for the automatic title to be transferred to the surviving spouse without the use of a probate.
Once you find which form of title is the best fit for you, it is vital that all of your assets be properly titled in your trust. As well as the trustees within the trust being specified by name and date.
This specificity allows for a simple transfer and access of assets and titles of the entire property upon death.
How Does Community Property Compare To Joint Tenancy For Married Couples Wanting To Hold Titles?
It is important to weigh the difference in probate fees from the community property with the smaller step up in the joint tenancy agreement.
The higher the appreciation value of the property, it may serve the married couples more to do the community property. However, it is about weighing your specific estate’s cost and deciding from there.
Choosing the Best Option to Hold Title as a Married Couple
There are a ton of title options to look through as a married couple. It is now time to see what is best for you and your spouse!
If you need more help with choosing a title, New Venture Escrow can help. Contact us today!
