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Buying a new home is always exciting and busy.  Moving plans, measuring for curtains, furniture, the list seems endless.  What is really endless is the amount of paperwork involved!  But when it comes time to make the important decision of how you should take title to your new home your agent and the escrow office will typically refer you to an attorney or your CPA.  It’s possible you didn’t even realize you had to make a choice before walking into escrow and now you have to choose between several unintelligible options. The choice of how to hold title has important tax and legal consequences.  Let me walk you through your options and the pros and cons of each choice.

Joint Tenancy

The old standard of joint tenancy offers the simple advantage that the surviving co-owner gets the whole property.  The disadvantage is that the tax basis for capital gains remains the same.  Some people look at this way of holding property as a way of avoiding probate, but it is limited to the people on title.

Tenants in Common

Holding title as “tenants in common” gives each person a specific percentage of ownership exclusive of the other owners.  This has the advantage that for capital gains the survivor inheriting the portion will receive a step up in basis for capital gains.  Here is an example: a couple buys a house in 1950 and pays $100,000 for the property.  Husband passes away in 2013, and the current market value of the property is $650,000.  If they held title in joint tenancy, wife would be the sole owner by right of title, but her “basis” for the property would be $100,000.  If they held title as “tenants in common” her basis for her half would remain the same – $50,000 from the date of purchase, but her basis for the half she inherited from her husband would “step up” to $325,000, a huge tax advantage when the wife decides to sell the property.

Community Property

This way of holding title is limited to married couples or domestic partners.  It is very similar to holding title as “tenants in common” giving the surviving spouse a step up in basis.  One big difference though is that tenants in common can sell their interest without the permission of any of the other owners, but when you hold title as community property, both spouses have to sign off on any sale.

Community Property with Right of Survivorship

Unique to California, “community property with right of survivorship” is one of those weird combinations that actually make sense.  This way of holding title gives you the advantage of the step up in basis offered by holding title as tenants in common with the benefit of the survivor receiving the property automatically without probate just like property held in joint tenancy.


When your real property assets, and other possessions for that matter, are in a trust, the property goes to the designated trust beneficiaries without going through probate.  The deed transferring your property into the trust sits on top of the way you held title before the property went into the trust.  This is why at Estate Plan Pros we have you sign a deed changing the manner of holding title to community property or tenants in common before transferring your property into the trust.  That way you can take advantage of the step up in basis, and the advantages of a completed estate plan.