Effective July 1, 2001, a new law (CCC 682.1) will allow married couples residing in
California to hold and vest title to real and personal property as
"Community Property with Right of Survivorship".
This form of holding title is probably most consistent with what spouses believe
they currently have.

Under current law, if a married couple holds title as "community property", upon the
death of a spouse, one-half of the community property passes to the surviving spouse
and the other half belongs to the decedent's estate. As a result, there are federal tax
advantages to holding property as Community property".
If the couple holds title as "Joint Tenants with Right of Survivorship", the expense
of administrating an estate through the probate courts is avoided, but the tax advantage
of community property is also jeopardized.

Often, in order to avoid this adverse tax impact, the surviving spouse will engage
the services of legal counsel to seek a probate court decree that joint tenancy property
was in fact community property; however, the IRS has questioned the effectiveness
of such decrees (See estate of Young v. Commissioner, 110 T.C. No.24, 1998).

With the new method of holding title, "Community Property with Right of Survivorship",
the State of California has affempted to give couples residing in California the best of both worlds.
Property owners contemplating holding title in this fashion or any other should first
seek the advice of their CPA or attorney.

Courtesy of Old Republic Title
Debra Mahoney
Account Manager
800-400-1956 Ext. 403