How You Own Your Home Matters More Than You Think

When people think about estate planning, they often think about creating a living trust. But there is another important question that is easy to overlook:

How is your home actually owned?

The way your name appears on the deed to your home or other real estate can have a big impact on what happens to the property after you die. It can affect whether your family has to go through probate, how the property passes to your loved ones, and even the taxes they may have to pay if the property is later sold.

Simply having a living trust does not necessarily mean your property is set up in the best way for your family.

In California, there are several common ways to own real estate:

Joint Tenancy

With Joint Tenancy, when one owner dies, that person's share generally passes automatically to the surviving owner.

This can help avoid probate. However, Joint Tenancy may not provide married couples with the same tax benefits as other forms of ownership.

Community Property

Community Property is generally available to married couples and registered domestic partners.

One of its biggest benefits is the potential tax savings after one spouse dies. Generally, the property's tax basis is adjusted to its value at the time of death. This can significantly reduce the capital gains taxes owed if the surviving spouse later sells the property.

However, Community Property by itself does not automatically mean the property will pass to the surviving spouse without probate. Additional estate planning may still be necessary.

Community Property with Right of Survivorship

Community Property with Right of Survivorship combines two important benefits.

When one spouse dies, the property generally passes automatically to the surviving spouse without probate. It can also preserve the valuable tax benefits available to property owned as Community Property.

For many married couples, this can be an attractive way to own their home.

Tenants in Common

Tenants in Common allows two or more people to own separate shares of the same property. Those shares do not have to be equal.

When one owner dies, that person's share does not automatically pass to the other owner. Instead, it passes according to that person's estate plan or, if there is no estate plan, under California law.

This can be useful for investment properties, blended families, unmarried owners, or situations where each owner wants more control over what happens to their share.

So, Which One Is Best?

The answer is simple: it depends on your goals.

For some families, avoiding probate is the priority. For others, reducing future taxes, protecting children from a prior marriage, or keeping separate property separate may be more important.

There is no single way to own property that is best for every family.

At ARK Law Estate Planning, one of the things we look at is how our clients currently own their real estate before we transfer it into their living trust.

Sometimes, it makes sense to change how the property is owned before placing it into the trust.

For example, a married couple may own their home as Joint Tenants. Depending on their circumstances, they may benefit from first changing the property to Community Property with Right of Survivorship and then transferring it into their living trust. This can help preserve important tax benefits while making sure the property is also part of their overall estate plan.

A living trust can help your family avoid probate, but creating the trust is only part of the process. Your assets also need to be properly transferred into the trust and structured in a way that supports your goals.

Your home is often one of your family's largest assets. Taking the time to make sure it is owned and planned for correctly today can save your family significant time, money, and complications in the future.

At ARK Law Estate Planning, we help families understand their options and create an estate plan that fits their property, their family, and their goals.

If you are unsure how your home is currently owned—or whether it is properly connected to your living trust—contact ARK Law Estate Planning to schedule a complimentary consultation.