California is a community property state and the method of establishing basis will depend in part upon how title was held at the time of the decedent’s death.

Current law generally allows a married couple the following options to hold title:

The benefits of this status include a guarantee that the surviving spouse will inherit the property with little or no transfer cost. The survivor is also assured of inheriting the decedent's share, since a secret will cannot divest a joint tenancy interest. The survivor receives a step-up or step-down in basis of only 50 percent of the FMV at the time of the decedent's death. The remaining 50 percent retains the survivor’s original (adjusted) basis.

This form of title provides a 100 percent step-up or step-down of the property's basis. In other words, both the decedent's and the survivor's halves get a new basis of the FMV upon the death of the first spouse. Unlike joint tenancy, each spouse can will his or her share of the community property to anyone at all. However, changing title when the first spouse dies requires a "spousal property petition" action that can require the survivor to incur legal expenses to remove the deceased spouse's name. This process can also take six to eight weeks.

There is a general presumption that all real property in California and all personal property wherever situated, that is acquired by a spouse during marriage, is community property (Family Code Sec 760). The presumption may be overcome (rebutted) by certain types of evidence to prove that the property is actually separate. Some property acquired during marriage is specifically excluded from the community property presumption (Family Code Sec. 802 and 803). The general community property assumption specifically applies to:

Beginning July 1, 2001, a married couple may hold title as “Community Property with Right of Survivorship”. Doing so will: Allow the double step-up or -down in basis; require that the surviving spouse inherit the property; and allow property to pass to the surviving spouse without court action.  

California does not conform to the federal inherited basis rules for 2010, so for California purposes, the inherited basis of assets of a decedent dying in 2010 is fair market value on the date of death (R&TC 18031, 18035.6). This is true even if, for federal purposes, the no estate election was made, and the federal basis was determined by modified carryover basis.

Also referred to as a Beneficiary Deed, allows a homeowner to deed their home to anyone without probate and without the complications of a joint tenancy.

The one-page document can be accessed for free on a local California county’s website. The language of the deed was modified beginning January 1, 2022, so make sure the correct one is used.

The TOD deed can be revoked at any time by notarizing and recording a Revocation of Revocable Transfer on Death Deed.

Beneficiary Requirements – To transfer title, beneficiaries must:

Unless any legal heirs object, the beneficiary becomes the owner.

It is recommended that a homeowner contemplating a TOD deed consult with their legal counsel before creating the document.