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Best way to hold title for a house in California?

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  • Best way to hold title for a house in California?

    We just got done closing on a house and I had asked the title company to use joint tenancy with rights of survivorship. Unfortunately on the day of closing they had ended up using husband and wife tenancy in common because according to them that was what all the lender paperwork referred to.

    Since I had expressly asked for JTROS, the lady said she would switch it to that for free, but we both suggested I look in to it a little bit more before I decide to switch it.

    And the truth is, I decided on JTROS based on some limited googling. So the question is, what is the best way to hold title for my wife and I if I want to protect it from any liabilities I may have? (Short of going for a trust.) To be honest, I still don't understand the concept of 'basis' and what it means for the valuation of the home when one of the parties dies.

  • #2
    From WCI intro to asset protection post:

    When you title a home, if you can, use “joint tenancy in the entirety.”  This means that both you and your spouse own the entire house, so a creditor can’t force you to sell it to get your share of the money out.

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    • #3


      To be honest, I still don’t understand the concept of ‘basis’ and what it means for the valuation of the home when one of the parties dies.
      Click to expand...


      Basis and Step up at death

      When you sell something, you owe taxes on the increase in price.  So if I buy a painting for $100,000, and sell it for $150,000, I owe taxes on the $50,000 price increase ( called capital gains ), which I pay at the capital gains rate, which varies with income.  The basis is what I paid for it, in this case $100,000.   The capital gains is the price I sell it for, minus the price I bought it for.

      However, if you bought the painting for $100,000, and you die, then the paining is appraised at the time of your death.  If it's worth $150,000, then the person who inherits it doesn't pay capital gains taxes, because the painting is declared to be worth $150,000 today, and that's considered his new basis basis.   ( but if your estate is over the estate tax exemption, the estate  would still pay estate tax on the new higher price )

      The re-pricing of this basis is called the step-up at death.

      Depending on how the house is titled, the surviving spouse might or might not get that step-up in basis at the death of the first spouse, or might only get half the step-up.

      Houses are a bit more complicated because each spouse also gets a capital gains tax deduction of $250k ( $500k for the couple together ) if they lived in it long enough.

       

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      • #4




        From WCI intro to asset protection post:

        When you title a home, if you can, use “joint tenancy in the entirety.”  This means that both you and your spouse own the entire house, so a creditor can’t force you to sell it to get your share of the money out.
        Click to expand...


        Thank you. California does not allow joint tenancy in the entirety, and so I presume joint tenancy with rights of survivorship is preferred over tenants in common, due to the nature of being able to unilaterally sell your 'share' with the latter.

        I just want to confirm I am not off track in assuming this is a superior way to hold title for a committed marriage. I am also not sure about which is better in terms of what happens when one party dies.

         

        Edit: this was pretty helpful: https://www.ca-trusts.com/jointtenancy.html

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        • #5
          As California is a community property state, does it make any difference (JTROS vs JTIC)?

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          • #6







            From WCI intro to asset protection post:

            When you title a home, if you can, use “joint tenancy in the entirety.”  This means that both you and your spouse own the entire house, so a creditor can’t force you to sell it to get your share of the money out.
            Click to expand…


            Thank you. California does not allow joint tenancy in the entirety, and so I presume joint tenancy with rights of survivorship is preferred over tenants in common, due to the nature of being able to unilaterally sell your ‘share’ with the latter.

            I just want to confirm I am not off track in assuming this is a superior way to hold title for a committed marriage. I am also not sure about which is better in terms of what happens when one party dies.

             

            Edit: this was pretty helpful: https://www.ca-trusts.com/jointtenancy.html
            Click to expand...


            Yes you are right. Yes have it changed. The death part is the same. If you have kids, time to get a trust as well.

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            • #7
              Any updates to this? Closing on a house in CA and I know that joint tenancy in the entirety is not possible in this state.

              From this link, Community Property with Right of Survivorship seems to make the most sense, but not sure if it is still the best for MDs.

              https://www.portersimon.com/best-way...home%20bullet.

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              • #8
                Without living trust, it would be more advantageous to hold real estate property in California as community property with right of survivorship to avoid probate and gain tax favorable "double step up basis"; ie, the cost basis is reset at the value at time of death of one spouse instead of 1/2 of the joint tenant. Ideally though, the title should be held in a living trust. To create a trust, it is about $3500-5000 in California through a lawyer, depending on locale. I would presume the lawyer with a fancy office in the Silicone Valley or downtown SF would cost more than Central Valley or East Bay.

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