Difference Between Community Property With Rights of Survivorship Vs. Joint Tenancy

By Andrine Redsteer

Property held as a joint tenancy and property held as community property with rights of survivorship have many similar characteristics. When a married couple owns property as a joint tenancy or as community property with rights of survivorship, the spouse who outlives the other automatically receives the deceased spouse's property interest. However, the two types of ownership differ regarding how each is taxed upon the death of a spouse.

Property held as a joint tenancy and property held as community property with rights of survivorship have many similar characteristics. When a married couple owns property as a joint tenancy or as community property with rights of survivorship, the spouse who outlives the other automatically receives the deceased spouse's property interest. However, the two types of ownership differ regarding how each is taxed upon the death of a spouse.

Joint Tenancies

When a married couple owns property as a joint tenancy, both spouses share equal ownership interests in the entire property. For example, if a married couple owns a home as joint tenants, each has a 50 percent interest in the home. However, these interests are undivided. This means that each spouse is entitled to use the entire property and the interests cannot be split up. When property is held as a joint tenancy it includes a right of survivorship. Thus, when one spouse dies, his interest automatically passes to his surviving spouse. The surviving spouse is then left with a 100 percent share of the property.

Ready to start your LLC? Start an LLC Online Now

Community Property Basics

There are nine states that recognize community property: Arizona, Idaho, Louisiana, Texas, Wisconsin, Nevada, Washington, New Mexico and California. In these states, marital property is viewed as belonging to each spouse equally. Each spouse has a right to pass on his share to whomever he wishes in a last will and testament. This differs from property owned as a joint tenancy in that neither spouse can pass their share to anyone but the other spouse. In a community property state, a spouse is typically entitled to some of the community property when the other spouse dies without a will dependent on whether there are children and if they are the children of the surviving spouse.

Community Property With Rights of Survivorship

Some community property states allow married couples to hold property as community property with right of survivorship. When community property is held this way, the surviving spouse is certain to receive the deceased spouse's share. In other words, spouses are not allowed to "bequeath," or pass, their shares of the community property to someone other than her spouse in a will.

Taxes on Profits

One main difference between property held as a joint tenancy and property held as community property with right of survivorship is the manner in which profits from the sale of jointly-held property is taxed. Generally, property held as community property with right of survivorship has tax advantages over a joint tenancy. In a joint tenancy, when one spouse sells property that was held jointly prior to the death of the other spouse, a portion of the profit is subject to capital gains tax. Whereas, community property with right of survivorship is not subject to capital gains tax when sold.

Additional Differences

Parties who are not married may hold property as a joint tenancy. For example, a brother and a sister may inherit property as a joint tenancy from their parents. However, community property with the right of survivorship exists only in a marital or registered domestic partnership context.

Ready to start your LLC? Start an LLC Online Now
What Is the Law for When Land Is Jointly Owned and One of the Owners Dies?

References

Related articles

Joint Tenancy and Divorce in California

All divorcing couples in California should carefully review titles to their real property to determine if it is community property or property owned as joint tenants. The difference between the two types of ownership may determine which spouse will receive the property if the other spouse dies before the divorce is final or who will get the property as part of the divorce settlement.

Does Survivorship Override the Will?

Property that is subject to right of survivorship is generally excluded from a decedent’s estate and is therefore not subject to a will. In some circumstances, however, a property loses its survivorship status and may become subject to a will. Property is governed by the laws of the state where it is located, so you should review the applicable statutes or consult with a licensed attorney.

Leaving Money in a Will to Spouse Vs. Sibling

Writing a will is one way that you can have a say in how your property is distributed after you pass away. However, you are not entirely free to distribute your property any way that you want. The law normally provides that your spouse receive at least a share. How much money you can leave to a sibling instead of your spouse depends on your state's laws.

LLCs, Corporations, Patents, Attorney Help

Related articles

What Happens to Joint Property When Someone Dies Without a Will in Pennsylvania?

One of the advantages to holding property in joint names is that it may avoid the probate process. In Pennsylvania, ...

Right to Inherit a Tenancy

A tenancy is a form of concurrent property ownership in which two or more people share interest in the same property. A ...

Can Tenancies by the Entirety Go to Probate if a Spouse Dies?

Some types of property are referred to as non-probate property, meaning they bypass probate entirely. The most common ...

Nebraska Divorce & Joint Tenancy Laws

In a joint tenancy, multiple owners hold property at the same time. In some states, a joint tenancy between a husband ...

Browse by category
Ready to Begin? GET STARTED