Tuesday, August 14, 2007

Holding Title as Community Property With Right of Survivorship

This article is for informational purposes only. Nothing in this article should be understood as legal advice, and no attorney-client relationship is created by it or the information it contains. Consult with a licensed attorney if you require assistance in a legal matter. This article is protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of The Burton Law Firm. You may not alter or remove any trademark, copyright or other notice from copies of the content.

Ownership of real property can take a great number of forms. The difficulty is deciding which form of title is right for you, your family, and your business. The facts of your situation will determine how title to property should be held, and properly selecting title form may involve transferring or re-titling property you already own. This article will provide an overview of a new form of title that many people are not yet familiar with: community property with right of survivorship (CPWROS).
Prior to 2001, married couples had to perform a bit of strategic planning when taking title to property. But the California legislature wanted to make it easier for California married couples to take advantage of federal tax benefits. On July 1, 2001, a new form of title was created: community property with right of survivorship. This form of title utilizes the right of survivorship feature while allowing a step-up in basis for community property.

Right of Survivorship

The right of survivorship feature allows the deceased spouse’s property ownership to immediately pass to the surviving spouse upon the first spouse’s death. Generally, no court administration is needed, thus avoiding the time and cost of the probate process.

Step-Up in Basis for Community Property of Both Spouses

A step-up in the basis of property provides an important tax benefit. When you acquire and maintain real property, you invest a certain amount of money in the form of purchase price and improvements. This investment becomes your basis in the property. When you sell or dispose of the property, you recognize a capital gain equal to the current fair market value of the property (i.e., what you sold it for) minus your basis. So if the property has appreciated in value over time, you want your basis to be as close as possible to the fair market value so that you can reduce gain. Reducing gain reduces the taxes that must be paid. A step-up in basis allows you to increase your basis in the property without recognizing any gains, which is a good thing. In a way, stepped-up basis is like the government handing a free investment.
CPWROS provides a large step-up in basis for property owned by a married couple in California. In a joint tenancy, the federal taxation system only allows a step-up in basis for the deceased spouse’s joint tenancy interest. Thus, the surviving spouse receives a stepped-up basis in the property equal to the fair market value of the deceased spouse’s joint tenancy interest.
But with CPWROS, when the first spouse dies and leaves property to the surviving spouse, the surviving spouse receives a step-up in basis both for the deceased spouse’s one-half interest in the community property and for the surviving spouse’s interest in community property. So the surviving spouse acquires a stepped-up basis in all of the community property, not just the deceased spouse’s share.


The goals, finances, and assets of your marriage and your business will all play a role in determining how you should hold title to real property. It is important to note that a properly drafted revocable living trust will provide these and other benefits as well. You should consult with an attorney to help determine whether holding property as community property with right of survivorship is right for your situation.

By The Burton Law Firm

For a more in depth review of this subject, please see: www.lawburton.com, news/resources.

The Burton Law Firm
555 University Avenue, Suite #275
Sacramento, CA 95825
Phone: (916) 570-2740 Fax: (916) 570-2744

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin

Disability Guidelines - Part One (Department of Justice Disability Guidelines)

On May 17, 2004, the United States Department of Justice presented guidelines regarding landlords (housing providers) making reasonable accommodations available to tenants and others under the Fair Housing Act (the “Act”). The Department of Justice and the Department of Housing and Urban Development (HUD) are jointly responsible for enforcing the federal Fair Housing Act which prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status, and disability. One type of disability discrimination prohibited by the Act is the refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling.
Prohibited acts: The guidelines state that “The Act prohibits housing providers from discriminating against applicants or residents because of their disability or the disability of anyone associated with them and from treating persons with disabilities less favorably than others because of their disability. The Act also makes it unlawful for any person to refuse to make reasonable accommodations in rules, policies, practices or services, when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling. The Act also prohibits housing providers from refusing residency to persons with disabilities, or placing conditions on their residency, because those persons may require reasonable accommodations. In addition, in certain circumstances, the Act requires that housing providers allow residents to make reasonable structural modifications to units and public/common areas in a dwelling when those modifications may be necessary for a person with a disability to have full enjoyment of a dwelling.”
In Part Two of this continuing series of articles regarding disability accommodations, we will discuss who is responsible for complying with the Act.

By Gary Link, Attorney at Law

Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin

Tax Saving Strategies for Real Estate Investors

There are many tax saving strategies that attract investors to real estate investments. Paying capital gains on profits at 15% rather than up to 35% on ordinary profits is one such strategy. There are a variety of other ways to save your dollars. In each Landlord Today article, we will focus on one tax saving strategy you or your current tax preparer may not have thought about.

Make the Most of Depreciation.
As mentioned above, most know that depreciating their properties brings tax savings, but a lot of investors miss valuable depreciation deductions because they don’t know how to make the most of them. The following steps will help you get more annual depreciation to save tax dollars:

Step 1: Divide basis between “land” and “improvements.” Remember land provides no depreciation, so the goal is to assign as much as possible to depreciable improvements. The IRS suggests you use local property tax assessments. You can use any allocation (such as bank appraisal or your insurer’s estimate of replacement costs) so long as you show “reasonable basis.” Don’t forget that driveways and sidewalks crack, landscaping needs replacing, and pipes from the house to the street deteriorate over time. Consequently, you can depreciate land improvements over 15 years. If you miss those assets, you lose money!

Step 2: Split out components of the building to get shorter depreciation periods. Buildings depreciate over 27.5 years for residential property and 39 years for nonresidential property. But isn’t a building a collection of components? Of course it is. Buildings include structural components like walls, roofs, furnaces, and windows that are integral to the building. These depreciate over the traditional 27.5 and 39-year periods. But buildings also include personal property that depreciates over just 5 years. It makes sense that if you allocate part of your purchase to that personal property, you’ll boost your depreciation during the first few years you own your property. These are probably the years you need it most! Personal property examples include cabinets, countertops, dishwashers and carpeting.

By Richard Lagomarsino, EA

Richard is the president of FTMS Inc. Go to www.ftms.net for more helpful information.

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin

Single Family Residential Rental Survey - 3rd Quarter 2007

We all know real estate prices are continuing to fall and that foreclosures and short sales are on the rise. But what does this mean for the rental industry? Most would-be buyers are convinced the market has not yet bottomed out; in the meantime they will choose to rent. The thousands of home owners who have lost their homes due to foreclosure or short sale will rent. And a select few have found that an alternative to losing their 3200 square foot home to the bank is to rent it out. They then opt to rent a 1300 sq ft home to live in, saving up to $800 a month. For the present, renting also remains a better alternative to buying as underwriters tighten their restrictions, and interest rates slowly rise. The demand for rentals is increasing, but what about the supply? Surprisingly, new home construction continues, thus a significant amount of surplus homes for sale are beginning to transition into rentals. This trend may actually create a surplus of rentals in 2008. Today’s balance in supply and demand has created an active and healthy rental market. As the holidays approach and the school year begins, expect the average number of days-on-market to increase and the demand to rent or buy a new home to decrease. In every market at any given time there is always opportunity for today’s investor.
For an investor looking to buy an income property, the real estate market is great and looking to get even better. For those investors ages 55 and greater, the Sun City community homes are a great investment opportunity. Expect to find sound tenants with excellent credit and rental histories and as the baby boomers continue to retire this market will continue to improve.
Putting opinion and preference aside, let’s look at the facts: According to InfoTracker’s third quarter rental survey, in comparison to second quarter numbers, rents have increased in Rocklin’s 95677 by +8.5% and decreased -5% in 95765. West Roseville rents on average have increased +4.8% in 95678 and +5.5% in 95747 compared to a -7% decline in East Roseville’s 95661. According to an article published on Forbes.com in July 2007 entitled “The Fastest-Growing Suburbs in America,” the city of Lincoln ranks as number one with an +8.3% increase in rents and a 236% increase in population from 2000 to 2006. Although rents are increasing in key sub markets and home values are continuing to depreciate it will still be more than a few years before we see single family income properties in this area pencil out as they once did in 1999.
In today’s dynamic real estate market, the rental market is a very popular alternative to owning.  If the current trends continue and interest rates remain reasonable, count on new investment opportunities to appear in these growing sub markets. Although we can all speculate on the future of tomorrow’s real estate market, the numbers provide information on the direction of today’s market. Utilizing this information, investors will make their move and the mass of speculators in turn will follow.  With the holiday season and school year approaching, look to a professional to rent up and manage your property so you can capitalize on the highest rate of return on your investment.

By Robert A. Ortiz, President/CEO

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin