Community Property with Right of Survivorship

California Civil Code 682.1 allows for any real property to be held as Community Property with Right of Survivorship (CPWROS) after July 1, 2001.

 

What is Community Property with Right of Survivorship?

CPWROS is a way of holding property between a husband and wife in California that enjoys the benefits of both Community Property and Joint Tenancy. Like Community Property, real property held as CPWROS receives a step-up in basis for both halves when one spouse, or domestic partner, passes. This is a huge tax incentive for the surviving spouse. CPWROS also enjoys those benefits found in Joint Tenancy in that a probate is not necessary to pass the property to the surviving spouse upon the passing of the initial spouse.

 

What are the Tax Implications for Community Property With Right of Survivorship?

For Estate Tax purposes, the gross estate of the decedent will only include the fair market valley of the one-half (community property) interest owned by the decedent. Thus for a residence valued at $500,000 at the date of death, held as CPWROS, the decedent spouse’s estate will include his/her $250,000 community property interest in the residence. As of 2011, the estate tax exemption is $5,000,000 with a 35% estate tax for amount over that limit.

For Income Tax purposes, both the decedent’s and the surviving spouse’s one-half community property interest will receive a full step-up in basis to the fair market value at the date of death if the property is held as CPWROS. AKA – Very good news! However, unlike a Living Trust, the surviving spouse will not receive a step-up in basis upon his or her passing. Additionally, since the surviving spouse is now the sole owner of the property, a “community property” interest no longer exists, as there is no “community”. If left unchanged, the real property previously held as CPWROS will likely need to go through Probate.

As you can see, CPWROS is a tool for short-term planning, where a Living Trust is much more powerful and efficient for long-term planning.

 

How Do I Create a Community Property with Right of Survivorship Interest?

A CPWROS interest is usually created by mechanism of Grant Deed. Within the Grant Deed itself, the real property is transferred from the original owner (and the original method of ownership, such as normal Community Property), to the new owners as CPWROS. Although in reality the owners remains the same (Husband and Wife), the method of ownership is changed, thus a legal change in title requires recording a document with the Country Recorder’s Office.

To change the way your real property is currently held to CPWROS, you will need to do the following:

1-Complete a CPWROS Grant Deed form (for a .pdf version, please click here)

2-Notarize the CPWROS Grant Deed form.

3-Complete a Preliminary Change of Ownership Report (click here for detailed information on how to complete a PCOR).

4-File both the PCOR and completed CPWROS Grant Deed, along with copies and a filing fee with the County Recorder.

 

Where Can I Find a Sample Community Property With Right of Survivorship Grant Deed?

The following is a sample CPWROS Grant Deed: (for a .pdf version, please click here)

RECORDING REQUESTED BY:
WHEN RECORDED MAIL TO AND MAIL TAX STATEMENTS TO:
NAME:
ADDRESS:
CITY:
STATE/ZIP:
_____________________________________________________________________________
Title Order No.:  ________ Space Above This Line For Recorder’s Use    Escrow No.:  ______

INTERSPOUSAL TRANSFER GRANT DEED  (COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP)

THE UNDERSIGNED GRANTOR(s) DECLARE(s):

DOCUMENTARY TRANSFER TAX is $ __________________.  CITY TAX $ __________________.  Computed on full value of property conveyed, or  

Computed on full value less value of liens or encumbrances remaining at time of sale or transfer.  Unincorporated area:  

City of __________________________________________________, and 

This conveyance is exempt from Documentary Transfer Tax: 

“This is a bona fide gift and the grantor received nothing in return, R & T 11911″. 

“This conveyance changes the manner in which title is held, grantor(s) and grantee(s) remain the same and continue to hold the same proportionate interest, R & T 11911″. 

“This conveyance confirms a community property interest, which was purchased with community property funds, R & T 11911″. 

Excluded from Reappraisal Under Proposition 13, California Constitution Article 13A § 1, et seq. 

This conveyance does not constitute a “change of ownership”, R & T 63. 

Check when grantees are expressly declaring that the transfer of the property is to be community property with right of survivorship.

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

hereby GRANT(s) to

__________________________,Husband and Wife, as Community Property with Right of Survivorship,

the following described real property in the County of _________________________, State of California (Assessor’s Parcel No. _________________________):

Dated:   ________________________  (Grantor)________________________________________

Dated:   ________________________  (Grantor)________________________________________

“GRANTEES HEREBY EXPRESSLY DECLARE AND ACCEPT THE TRANSFER OF THE HEREIN DESCRIBED PROPERTY AS COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP.”

Dated:   ________________________  (Grantee)________________________________________

Dated:   ________________________  (Grantee)________________________________________

STATE OF CALIFORNIA                      }

COUNTY OF _____________________} SS

On ________________________________________ before me, ______________ ________________________________________________ (here insert name and title of the officer), personally appeared ________________________________________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature _____________________________________________