Whether you are just starting out or have each accumulated separate property, you need an estate
plan to provide for each other and ensure the survivor can remain in the home, if one dies. The
“how” depends on the couple’s type of commitment and the property’s title.
If you are not married or in a registered domestic partnership, you are considered
individuals. Estate planning for each other is critical, as the law offers no protection. The
simple gift of a house could be subject to gift tax and property tax reassessment. If one party
holds the property as separate property, a trust offers options to provide for each other.
Married couples have it easy. Since 2015, California and federal law treat same sex spouses the
same as opposite sex spouses with respect to real property, Social Security, MediCare, IRA’s,
retirement plans, and taxes. Transfers of property are not subject to gift tax and are excluded
from property tax reassessment.
California is a community property state. Community property is all property acquired during
marriage. Your home passes to your surviving spouse by operation of law, if titled as “joint
tenancy” or “community property with right of survivorship”, which has the added benefit of a step
up in basis to potentially reduce capital gains tax if the property is sold. Holding the home in
trust avoids probate and allows flexibility when the property passes to children or family members
after the death of the second spouse.
The rules for registered domestic partners (RDPs) are more complex. California recognizes
RDPs as spouses, but the IRS or other federal agencies do not. Because of the differences between
federal and state law, consultation with an estate planning attorney is critical. For retirement assets, consult with a benefits expert.