Regarding the recent question in the Bee on changing title of your home to community property with right of survivorship, what is the overall benefit of making the change? We paid off our house about a year ago and wonder if changing the title is something recommended.
Prior to 2001, married couples without a trust most commonly held title to their real property as "John Smith and Mary Smith, husband and wife, as joint tenants" or "John Smith and Mary Smith, husband and wife, as community property." If the Smiths held title as joint tenants, on the death of the first spouse, the joint tenancy form of title made transfer of the property to the surviving spouse very simple. The surviving spouse simply had to record an affidavit and the death certificate with the Office of the County Recorder for the county in which the property was located and title then would be held solely by the surviving spouse.
If title was held as community property, the surviving spouse had to file a petition with the probate court asking the court to confirm that the property was community property and that the interest of the deceased spouse passed to the surviving spouse. For capital gains tax purposes, even though only a one-half interest in the property was included in the deceased spouse's estate, holding title as community property allowed the surviving spouse to claim a step-up in basis as of the date of death of the deceased spouse on both halves of the property, which was not the case for property held in joint tenancy.
In 2001, California enacted another form of title holding, which combined the advantages of joint tenancy and community property title holding. Married couples could hold title to their real property as "John Smith and Mary Smith, husband and wife, as community property, with right of survivorship." This allowed married couples the benefit of joint tenancy title holding - transfer by recording of an affidavit on the death of the first spouse and avoiding a court proceeding - while also deriving the tax benefit of receiving a step-up in basis for the entire property.
The information provided is very general and assumes that the character of the property owned by you and your husband already is community property. There may be other factors to consider before changing the form of title to property which could be unique to a specific circumstance and which are beyond the scope of this article. It is therefore recommended that you consult with your estate planning attorney or accountant to find out how such a change might affect your particular situation.