How you hold title to an asset affects how it can be disposed of during lifetime and how it will be distributed upon your death. Title to property affects inheritance taxes and the extent to which probate may be needed.
Community Property. Nevada is a community property state. Property acquired during marriage by the labor of either or both spouses is deemed “community property” and each spouse has an equal interest therein. It is possible to acquire or hold property as “community property” or as “community property with right of survivorship.” The additional language “with right of survivorship” ensures that the surviving spouse will receive title to the whole of the asset upon the death of the first spouse. Holding an asset as community property also creates a tax advantage, in that the surviving spouse will get a step up in basis on the asset to the date of death of the first spouse. In other words, the surviving spouse will not have to pay a capital gains tax on the increase in value from the date of purchase to the date of the first spouse’s death.
Separate Property. A married person may also hold property as his or her separate property. This includes property that was acquired prior to marriage, or property acquired during marriage by one spouse only as a gift or an inheritance. A spouse with separate property may make a gift of that property to the community by deeding or changing title of the asset to community property. If the spouse continues to hold the property as separate, upon death the spouse may will it to anyone he wishes; the surviving spouse does not have any legal right to it. However, if a spouse with separate property dies without a will, separate property will pass according to Nevada’s laws on intestate succession, and the surviving spouse will be entitled to a share of the property.
Joint Tenancy. Two persons, whether or not married, may hold property as joint tenants. Upon the death of one joint tenant, the surviving joint tenant becomes the owner of the whole of the property. In other words, the heirs of the first joint tenant to die do not inherit that person’s interest in the property; it passes by operation of law to the surviving joint tenant. For this reason, sometimes joint tenancy language also says “with right of survivorship.” For married couples, a partial step-up in basis is available if title is held in joint tenancy.
Couples should be aware of and sensitive to the manner in which they hold title. A change in how an asset is titled will change how the asset is distributed at death. If you have questions or concerns, you should contact a qualified Nevada attorney.