This is the second episode of our new video series covering the right of survivorship among co-owners.

The prior episode introduces the concept of vesting.

Avoiding probate procedures

Consider a married couple who, with the assistance of their agent, locate real estate they intend to purchase. They will use monies accumulated during their marriage and a new purchase-assist mortgage to pay the purchase price.

The agent, as part of their due diligence on any property acquisition, asks the couple how they want to take title on the close of escrow. The couple wants the property to be vested in both of their names, as a married couple, with the right of survivorship.

On the death of a spouse, the couple wants the surviving spouse to automatically become the sole owner of the property, avoiding probate procedures.

Recognizing the community property aspect of their funds accumulated during marriage, the agent advises the couple they need to take title as:

  • “a married couple as community property with right of survivorship”; or
  • “a married couple as joint tenants.”

The agent explains the two vestings are identical for future conveyancing since:

  • both vestings may be severed before death by either spouse to provide for an alternative distribution of each spouse’s ownership interest to others by will, a trust agreement or another vesting of their interest; and
  • on death the title is cleared of the deceased spouse’s interest by the surviving spouse recording an affidavit declaring the death of the deceased spouse and attaching a certificate of death. [See RPI Form 460; see RPI Form 461]

However, mindful of the tax consequences for the surviving spouse, the agent recommends the couple vest title to the property as community property with right of survivorship. Like the tax consequences of a joint tenancy vesting by spouses, the surviving spouse is assured a fully stepped-up cost basis for the community property.

In this example, the agent’s advice to vest the property as “community property with right of survivorship” satisfies the couple’s estate planning needs for holding title to the property. Likewise, since the property was acquired during the marriage, it is considered community property even when the couple vested the property in their names as joint tenants.

Additionally, the couple intends to avoid probate procedures on the death of a spouse. Both right of survivorship vestings avoid enforcement of any contrary provisions in the will of the deceased since no interest remains under either vesting to be transferred by will or otherwise after death.

Editor’s note – Stay tuned for further coverage on this topic.