First, it is nice to know that the issue of how to take title can be put off until after escrow is opened. In fact, the CAR purchase contract (PP12D) states: “Title shall vest as designated in Buyers supplemental escrow instructions.” Thus, a buyer can submit to escrow at anytime prior to closing a simple statement designating how they wish to take title or the escrow officer can draft an addendum to that effect.
Secondly, there are three types of title options that a husband and wife need to consider in purchasing residential property: either joint tenancy which mandates right of survivorship or community property plain and simple or the newest form of taking title here in California called Community Property with Right of Survivorship, which blends the best of community property with the best of joint tenancy.
The advantage of community property is it allows the tax basis at the time of a spouses death to be established as the value at the time of death for the remaining spouse and not the value that was paid for the property. Example: husband and wife purchase a home for $10,000. The husband dies. The value at the time of death is $200,000.
If they had held title in joint tenancy, the tax basis would have been less because as a joint tenant the wife already owns of the property. She inherits her husbands half upon his death, which would be valued at $100,000 in this case. Her tax basis on her half would remain the same, $5000, [ of $10,000, which is the price they paid for the property.] Therefore, as joint tenants, her total tax basis on the death of the husband would be $105,000, not the $200,000 as it would be under community property. So community property has an advantage when considering the tax basis. With the right of survivorship, probate is not required. The wife, in this case, would file a Affidavit of Death of Spouse. Thats all.
The right of survivorship in the community property issue can be terminated by either spouse at any time. This may or may not be an important point to consider when electing Community Property.