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.

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.

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.

Ready to start your LLC? Start an LLC Online Now

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

Are Investments Cashed in a Split During Divorce?

Money invested during your marriage – and sometimes invested even before you married – is up for grabs if you and your spouse divorce. It's a marital asset, so you both have an interest in it, just as you would any other marital property. How you split it depends on your state's laws, although you can reach your own terms in a marital settlement agreement.

Can a Spouse in California Leave an Inheritance to Someone Else?

Mistress, grandson, personal trainer or Greenpeace; a married person in California can leave his property to anyone he likes when he dies. The state's community property law plays a role in dividing up marital property between spouses, but it does not restrict a spouse's right to leave his share of the marital property -- as well as all of his separate property -- to whomever he likes.

Dying Without a Will in North Carolina

In North Carolina, as in other states, dying without a will is known as dying intestate. It means your assets and liabilities are handled according to the state's laws of intestate succession. This is a complex set of rules, enforced by the probate court, that determines who the heirs of your estate are and the portion of the estate to which they are entitled.

LLCs, Corporations, Patents, Attorney Help LLCs

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, ...

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 ...

California Laws on Community Property in a Bankruptcy

California is one of only nine community property states in the U.S. Married spouses who live in those state shares ...

Foundation Vs. 501(c)(4)

According to the Internal Revenue Code, a foundation qualifies as a 501(c)(3) nonprofit organization. The Internal ...

Browse by category
Ready to Begin? GET STARTED