In California, can parents and children hold title to real estate as community property?

[darwinian2]

In California, can parents and children jointly hold title to real estate as community property? If so, is there a right of survivorship and a step-up in cost basis for tax purposes?

 

[LdiJ]

In California, can parents and children jointly hold title to real estate as community property? If so, is there a right of survivorship and a step-up in cost basis for tax purposes?

In all 50 states its possible for parents and children to hold real estate jointly (community property is the wrong wording) with rights of survivorship. However, a stepped up basis only applies to inherited property.

 

[Taxing Matters]

In California, can parents and children jointly hold title to real estate as community property? If so, is there a right of survivorship and a step-up in cost basis for tax purposes?

The term "community property" only applies to property held between a husband and wife in those states that, like California, use a community property system. But any group of people may co-own property as joint tenants with a right of survivorship (JTWROS). When property is held JTWROS then when one of them dies, his/her interest ceases to exist and the other owners then take over the deceased person's interest in the property.

So let's suppose we have Amy and Bart, a married couple. They have two adult children, Carrie and David. They live in California. They all buy a piece of property together known as Blackacre, and own title together as JTWROS. Amy and Bart would, as between the two of them, hold their interests in the property as community property.

David then dies in a car accident. At the time he dies, his interest in the property ceases and the others then take over his interest in the property. The basis they get in his share is the value of that interest on the date David died, what is often called the basis step up.

 

[Litigator22]

In California, can parents and children jointly hold title to real estate as community property? If so, is there a right of survivorship and a step-up in cost basis for tax purposes?

Most certainly parents and their adult children can share joint ownership in real property. And the deeded interest of the parents could very well be that of a community property interest. But such an interest would be exclusive to the parents and not to be shared by other joint owners. The latter of whom could be married, etc. , etc.

Also each spouse has a vested undivided one half interest in all community property held by the marital estate; and without rights of survivorship per se.

 

[FlyingRon]

Note, that it isn't clear whether you are talking about adult children or minors. It's problematic to give minors ownership in property as they can't dispose of it themselves (and neither can their parents on their behalf).

 

[LdiJ]

Note, that it isn't clear whether you are talking about adult children or minors. It's problematic to give minors ownership in property as they can't dispose of it themselves (and neither can their parents on their behalf).

Are you sure about the bolded?

 

[Taxing Matters]

It's problematic to give minors ownership in property as they can't dispose of it themselves (and neither can their parents on their behalf).

Each state is different on what is needed for a minor to convey an interest he or she has in real estate. California is unusual in having a statute that expressly prevents a minor from even entering into aany contract "relating to real property or any interest therein." California Family Code § 6701(b). So in California, it appears that when it comes to giving a minor an interest in real estate, the way to do it is have a trust hold the property for the benefit of the minor. The trust then may deal with the property on behalf of the minor. If the parents are the trustees of the trust, then the parents would be able to sell the property for the minor in their capacity as trustees. So I don't see this as especially "problematic". It's just a matter of knowing a trust is generally what you need. Forming the trust for this is not all that difficult and can be done easily by an attorney for a reasonable cost.

 

[FlyingRon]

Usually when someone is talking about willy nilly adding people for "estate" purposes, there's no contract involved, just the deed.
If you add a minor to the deed, you're going to take a court action to get them to convey it. If you deed it to a trust for the child's benefit, then you're not putting as a co-owner. The trust is.

The point is, if you're trying to assure your children get your property when you die, adding them to the deed NOW is a bad idea. Either have a good will or deed your property to a trust.