What are the different methods, and what’s the difference between the different methods of taking title to real property?” “Should we take title as tenants in common, as joint tenants, or as community property with rights of survivorship?”
Tenants in common is where two people own a undivided interest in their property. If two people come together, they each own a 50 percent undivided interest as tenants in common. Joint tenants is similar to tenants in common, but if one person were to die, the joint tenants has what’s called rights of survivorship. The joint tenant would then own the entire piece of property, whereas in tenants in common, if one person dies, that person’s will or trust would say where that person’s half of interest goes.
Now community property with rights of survivorship is similar to joint tenants, except this would be between husband and wife only, and in the community property estate. Now the reason why you’d want to own something as community property with rights of survivorship instead of as joint tenants is because there are tax advantages. It’s called a double step up in basis. We can talk about that another time, but there are tax advantages afforded only to married couples for having property title in this way. Thanks for tuning in to Whitney’s Tax Files.
Whitney Sorrell is a tax attorney who helps his clients with estate planning, sophisticated tax structures and business formation. He is a former IRS Agent and CPA.