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How Your Marriage Avoids Probate in California

Marriage avoids probate if real property is owned as “joint tenants,” “community property with the right of survivorship,” or in a trust

If the marriage ends because of the death of one spouse, an affidavit of death is needed by the survivor to inform the County recorder of the death. If the marriage ends in divorce, the soon-to-be-non-owning spouse must transfer his or her interest by deed to the other spouse.

Both joint tenancy and “Community property with the right of survivorship” have the right of survivorship. This right avoids probate. But “Community property with the right of survivorship” has an advantage over joint tenancy The advantage is a “step up in basis” to the surviving spouse. If the surviving spouse sells the real property, there is the potential for a reduction in capital gains tax.

But the major problem with the right of survivorship is the danger of probate on the death of the second spouse. The surviving spouse must take action to avoid probate. The two actions available are to either create a trust or prepare a “revocable transfer on death deed.”

Trusts avoid probate

Trusts avoid California probate court. But for a trust to work the real property must be owned by the owner’s trust. Transfer of real property to a trust is by a deed from the owner to the owner as trustee of his or her trust.

Upon the death of the owner of a trust, an “affidavit of death of trustee” is prepared. This informs the County recorder the owner/trustee has died and who is the new trustee. The new trustee prepares a deed to either to sell or to transfer the real property.

Revocable transfer on death deed avoid probate

The Revocable Transfer on Death Deed (“TODD”) does not change owners. It merely identifies the heir on death of the real property owner. As a result a TODD has no unfavorable effect on property tax and capital gains tax. The current owner maintains total control of the property. These deeds are straightforward and low cost.

The major drawback is title companies are reluctant to issue title insurance for three years after the death of the owner. This in effect prohibits the sale or use of the real property as loan collateral by the new owner for a period of three years. Another drawback is a TODD cannot provide for a contingency if the intended heir dies before the owner.

A deed is used to add a spouse as a co-owner. Co-owner spouses have the options to own as “joint tenants,” “community property with the right of survivorship” or as trustees of a revocable trust. The surviving spouse of a trust avoids probate on death. The surviving spouse of property owned as joint tenants or as community property with the right of survivorship must take action. Action is either to create a trust or a revocable transfer on death deed.