HOW YOU HOLD TITLE MAKES A DIFFERENCE
The kind of assets you own and how you hold title to those assets is a very important element in the estate planning process. Before you change or take title to an asset, you should understand the tax and other consequences of any proposed acquisition or change. Your estate planning lawyer will be able to advise you. This issue should not be left to be decided by individuals merely because they work for title companies, banks, or other financial institutions.
Community Property and Separate Property
If you are married, those assets earned by either you or your spouse during marriage (and while a resident of California) are community property. On the other hand, a married individual may own separate property as a result of assets held prior to marriage or received by gift or inheritance during marriage. There are important tax considerations which need to be thought through in the estate planning process with respect to both community property and separate property. Separate property can be "transmuted" (that is changed) to community property by a written agreement signed by both spouses and written in compliance with California law.
Joint Tenancy Property
Regardless of its source, if a property is held in joint tenancy, it will pass to the surviving joint tenant by operation of law upon the death of the first joint tenant even if you will or trust has contradictory language. On the other hand, property held as community property or as tenants in common, will be distributed pursuant to the terms of your will or trust.
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