COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP Guide With Pros & Cons

Community property with right of survivorship
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A common way for two people to hold a property title together equally in Arizona or California is community property with the right of survivorship. These ownership structures prevent your property from going through probate court. It also ensures that a surviving co-owner inherits the property after the death of the other partner. Let’s go over this in more detail…

What Is Community Property With the Right of Survivorship?

Community property with the right of survivorship is a type of title ownership for married couples only. Each spouse owns the property equally, allowing them an equal division of the property after divorce or death. Like joint tenancy, community property with the right of survivorship also grants the surviving spouse full ownership of the property. Arizona is one of only five states that have community property with the right of survivorship laws. The other four states include Nevada, California, Wisconsin, and Texas.

Community Property With Right of Survivorship in California

Community property refers to property that was got during the course of a marriage. California is a community property state. As such, all assets you buy during your marriage or domestic partnership are community property, except for each partner’s separate property.

Community property with the right of survivorship is a relatively new form of owning real property. It was created by the California legislature in 2001. It combines the security of owning property as joint tenants with the tax benefits offered by California’s community property system. If you live in a community property state such as California or Arizona, you and your spouse can likely avoid probate. This can be possible by taking title to the property as community property with the Right of Survivorship.

Partner’s Separate Property

let’s consider the following assets as one partner’s separate property:

  • Partner investments before the marriage.
  • Property that was acquired by the partner through gifts.
  • Assets that were purchased with the partner’s separate money. 
  • Profits from a partner’s separate property.

The right of survivorship determines what happens to a particular type of ownership of the property after one of its owners dies. An example of this would be if A, B, and C have joint possession of the real property. C’s share will be equally distributed to A and B when C is deceased. The right of survivorship is a very powerful legal right, due to the fact that it can override other legal considerations, such as inheritance claims. Until recently, the Right of survivorship was only recognized under certain common law doctrines. It is now recognized under the statute in all U.S. states.

How to Create Community Property With a Right of Survivorship in California

To create a community property with the right of survivorship, the property in question must be located in a community property state. Turning the property into the right of survivorship community property simply requires using the correct language when drafting the property’s title document. California couples need to put in writing the following clause in the title document. “Couple takes title to the property as community property with right of survivorship.” An attorney can ensure that the correct legal language is in use so that creating such property is legally enforceable.

Under 33-431(C), a grant or devise to a married couple may, by express words, vest the estate in the surviving spouse on the death of one of the spouses when expressly declared in the grant, transfer or devise to be an estate in community property with right of survivorship. An estate in community property with the right of survivorship may also create a grant or transfer from a husband and wife, when holding title as community property or otherwise, to themselves or from either husband or wife to both husband and wife.

To remove the community property with the right of survivorship, California or Arizona spouses can simply remove the survivorship provision from the title document. They would then prepare a new title document excluding the right of survivorship.

It is important to claim the right of survivorship must be in order to be effective. The parties may not lay claim to the share of the decedent if they do not claim the right of survivorship within the property title document. There could be a distribution of the deceased tenant’s share according to other laws, such as probate laws, or according to the directions contained in the decedent’s will.

How Does Community Property Avoid Probate?

The term probate refers to the legal process of distributing a person’s assets upon their death, according to their will. The probate process itself is a series of hearings that is in control by a judge in order to:

  • Determine and prove the validity of the decedent’s will.
  • Document the decedent’s property that is to be distributed.
  • Ensure you pay all taxes and debts owed by the estate.
  • Ensure distribution of all assets is according to the decedent’s will, as well as any applicable state laws.
  • The probate process differs from state to state and is largely on the size and distribution of the estate.

In a community property system such as in California, when the first spouse dies, the entire property automatically transfers to the survivor. The property does not need to go through the probate process in order to get to the survivor. The process is thus simplified.

Generally, anything that a married couple accumulates during the marriage is automatically community property. Assets acquired prior to the marriage, or gifts, wills, and inheritances are usually sole and separate (individual) property. The principles of community property are to address the unfairness that can occur when both parties contribute substantially to the marriage. However, only one party handles transactions or makes more money and ends up with all titles or assets in his/her name only.

Community Property With Right of Survivorship in Arizona

Like many western states, Arizona allows legally married couples to own real estate as community property, with or without rights of survivorship. The rules and definitions are in Section 33-431 of Arizona statutes. Under this form of ownership, both spouses hold undivided shares of the whole, and when one spouse dies, the survivor gains ownership of the whole property without the need for probate, and both halves receive a new tax basis equal to the fair market value as of the date of death. Otherwise, when one spouse dies, the community property is divided equally, with half going to the surviving spouse and half distributed as directed by the deceased spouse’s will. In case of divorce or annulment, the judge often determines the equitable distribution of community property.

Section 33-431(D) further states that in the case of real property owned by spouses as community property with the right of survivorship, the right of survivorship is extinguished as provided in section 14-2804, or on the recordation in the office of the recorder of the county or counties where the real property is located, an affidavit titled “affidavit terminating right of survivorship” executed by either spouse under oath, that sets forth a stated intent by the spouse to terminate the survivorship right, a description of the instrument by which the right of survivorship was created including the date the instrument was recorded and the county recorder’s book and page or instrument reference number and the legal description of the real property affected by the affidavit. The recordation shall not extinguish the community interest of either spouse, so they still share ownership, but can individually convey their rights in a will.

Consequences of Community Property With Right of Survivorship

The most important consequence is that, when the first partner dies, the whole property automatically belongs to the survivor. Therefore it does not need to go through probate to get to the survivor.

If you hold the title as “community property and one spouse dies, the other spouse will own the property. Probate will not be necessary to make the transfer. The process of transferring the title to the surviving spouse will be simple. The exact step depends on the type of property. However, all the new owners have to fill out a straightforward form and present it, with a death certificate, to whoever keeps the ownership records. It could be a bank,  or county real estate records office.

What Happens to Community Property When One Spouse Dies?

When one spouse dies, community property specifies that the other spouse would gain full ownership of the property. For example, if a married couple purchased a house together as community property, the surviving spouse would then have full ownership of the property. 

Furthermore, the community property will avoid a legal probate process, as ownership would be on transfers rather than inherited. The surviving spouse qualifies for a double step-up in tax basis for the assets. However, the property tax will depend on the value at the time of the deceased spouse’s death. 

Can Spouse Own Community Property With the Right of Survivorship?

The laws of community property states allow spouses to own community property with the right of survivorship. The spouse can agree between themselves that all the community property which they have presently or will acquire in the future will become the property of the surviving spouse on the death of a spouse.

Such agreements avoid probate at the first death of a spouse. However, it is strongly recommended that spouses should not enter into community property with the right survivorship agreements for several reasons.    

  • Restriction of ownership structures that is useful in family and estate planning.
  • It is difficult for a will or contract to change community property with the right of survivorship. The title document will void all later arrangements of the parties. 
  • Community survivorship property can create more problems than it can solve. That’s why most couples stay away from such ownership.

Pros and Cons of Community Property With the Right of Survivorship

It’s important to consider the likely cons and pros before opting for this agreement. Here are a few things to consider before choosing community property with the right of survivorship.

Advantages

Consider the following advantages of community property with the right of survivorship:

  • Equal ownership of the property. 
  • The transfer of property avoids probate.
  • Community property can include real estate, vehicles, furniture, and other properties the couples may acquire during their marriage. 

Disadvantages

Let’s also view the following disadvantages of community property with the right of survivorship:

  • Community property with the right of survivorship requires legal marriage.
  • The property cannot pass to anyone other than the surviving spouse, even with a will.
  • Common-law marriages that had been valid in other states.

Community Property FAQs

What happens to a Community Property if one owner dies

If one partner dies, the property automatically passes to the other surviving partner.

Does right of survivorship override a will

Yes, even if the deceased did write a will stating that their interest in the property should be passed on to someone else.  

What is the right of survivorship?

The right of survivorship is a right of joint property owners that ensures the transfer of one owner’s stake to the remaining property owner in the case of his or her death.

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